    [House Hearing, 111 Congress]
    [From the U.S. Government Publishing Office]

                         THE ROLE OF NEIGHBORWORKS AND
                       HOUSING COUNSELING INTERMEDIARIES
                           IN PREVENTING FORECLOSURES

    =======================================================================

                                    HEARING

                                   BEFORE THE

                                SUBCOMMITTEE ON
                       HOUSING AND COMMUNITY OPPORTUNITY

                                     OF THE

                        COMMITTEE ON FINANCIAL SERVICES

                         U.S. HOUSE OF REPRESENTATIVES

                         ONE HUNDRED ELEVENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                  MAY 13, 2009

                                   __________

           Printed for the use of the Committee on Financial Services

                               Serial No. 111-30

                      U.S. GOVERNMENT PRINTING OFFICE
    51-589                    WASHINGTON : 2009
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                     HOUSE COMMITTEE ON FINANCIAL SERVICES

                     BARNEY FRANK, Massachusetts, Chairman

    PAUL E. KANJORSKI, Pennsylvania      SPENCER BACHUS, Alabama
    MAXINE WATERS, California            MICHAEL N. CASTLE, Delaware
    CAROLYN B. MALONEY, New York         PETER T. KING, New York
    LUIS V. GUTIERREZ, Illinois          EDWARD R. ROYCE, California
    NYDIA M. VELAZQUEZ, New York         FRANK D. LUCAS, Oklahoma
    MELVIN L. WATT, North Carolina       RON PAUL, Texas
    GARY L. ACKERMAN, New York           DONALD A. MANZULLO, Illinois
    BRAD SHERMAN, California             WALTER B. JONES, Jr., North
    GREGORY W. MEEKS, New York               Carolina
    DENNIS MOORE, Kansas                 JUDY BIGGERT, Illinois
    MICHAEL E. CAPUANO, Massachusetts    GARY G. MILLER, California
    RUBEN HINOJOSA, Texas                SHELLEY MOORE CAPITO, West
    WM. LACY CLAY, Missouri                  Virginia
    CAROLYN McCARTHY, New York           JEB HENSARLING, Texas
    JOE BACA, California                 SCOTT GARRETT, New Jersey
    STEPHEN F. LYNCH, Massachusetts      J. GRESHAM BARRETT, South Carolina
    BRAD MILLER, North Carolina          JIM GERLACH, Pennsylvania
    DAVID SCOTT, Georgia                 RANDY NEUGEBAUER, Texas
    AL GREEN, Texas                      TOM PRICE, Georgia
    EMANUEL CLEAVER, Missouri            PATRICK T. McHENRY, North Carolina
    MELISSA L. BEAN, Illinois            JOHN CAMPBELL, California
    GWEN MOORE, Wisconsin                ADAM PUTNAM, Florida
    PAUL W. HODES, New Hampshire         MICHELE BACHMANN, Minnesota
    KEITH ELLISON, Minnesota             KENNY MARCHANT, Texas
    RON KLEIN, Florida                   THADDEUS G. McCOTTER, Michigan
    CHARLES A. WILSON, Ohio              KEVIN McCARTHY, California
    ED PERLMUTTER, Colorado              BILL POSEY, Florida
    JOE DONNELLY, Indiana                LYNN JENKINS, Kansas
    BILL FOSTER, Illinois                CHRISTOPHER LEE, New York
    ANDRE CARSON, Indiana                ERIK PAULSEN, Minnesota
    JACKIE SPEIER, California            LEONARD LANCE, New Jersey
    TRAVIS CHILDERS, Mississippi
    WALT MINNICK, Idaho
    JOHN ADLER, New Jersey
    MARY JO KILROY, Ohio
    STEVE DRIEHAUS, Ohio
    SUZANNE KOSMAS, Florida
    ALAN GRAYSON, Florida
    JIM HIMES, Connecticut
    GARY PETERS, Michigan
    DAN MAFFEI, New York

            Jeanne M. Roslanowick, Staff Director and Chief Counsel
               Subcommittee on Housing and Community Opportunity

                     MAXINE WATERS, California, Chairwoman

    NYDIA M. VELAZQUEZ, New York         SHELLEY MOORE CAPITO, West
    STEPHEN F. LYNCH, Massachusetts          Virginia
    EMANUEL CLEAVER, Missouri            THADDEUS G. McCOTTER, Michigan
    AL GREEN, Texas                      JUDY BIGGERT, Illinois
    WM. LACY CLAY, Missouri              GARY G. MILLER, California
    KEITH ELLISON, Minnesota             RANDY NEUGEBAUER, Texas
    JOE DONNELLY, Indiana                WALTER B. JONES, Jr., North
    MICHAEL E. CAPUANO, Massachusetts        Carolina
    PAUL E. KANJORSKI, Pennsylvania      ADAM PUTNAM, Florida
    LUIS V. GUTIERREZ, Illinois          KENNY MARCHANT, Texas
    STEVE DRIEHAUS, Ohio                 LYNN JENKINS, Kansas
    MARY JO KILROY, Ohio                 CHRISTOPHER LEE, New York
    JIM HIMES, Connecticut
    DAN MAFFEI, New York

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on:
        May 13, 2009.................................................     1
    Appendix:
        May 13, 2009.................................................    47

                                   WITNESSES
                            Wednesday, May 13, 2009

    Bowdler, Janis, Associate Director, Wealth-Building Policy
      Project, National Council of La Raza (NCLR)....................    28
    Hasegawa, Lisa, Executive Director, National Coalition for Asian
      Pacific American Community Development (National CAPACD).......    24
    Hernandez, Colleen, President and Chief Executive Officer,
      Homeownership Preservation Foundation..........................    21
    Keating, Susan C., President and Chief Executive Officer,
      National Foundation for Credit Counseling (NFCC)...............    23
    Richardson, Cy, Vice President, Housing and Community
      Development, National Urban League.............................    27
    Wade, Kenneth D., Chief Executive Officer, Neighborhood
      Reinvestment Corporation (now doing business as NeighborWorks
      America), accompanied by Jeannie Fekade-Sellassie, Program
      Administrator, National Foreclosure Mitigation Counseling
      Program........................................................     6

                                    APPENDIX

    Prepared statements:
        Bowdler, Janis...............................................    48
        Hasegawa, Lisa...............................................    58
        Hernandez, Colleen...........................................    69
        Keating, Susan C.............................................    79
        Richardson, Cy...............................................    85
        Wade, Kenneth D..............................................   102

                  Additional Material Submitted for the Record

    Waters, Hon. Maxine:
        Written statement of Charles Wehrwein, President, Housing
          Partnership Exchange, The Housing Partnership Network......   160

                         THE ROLE OF NEIGHBORWORKS AND
                       HOUSING COUNSELING INTERMEDIARIES
                           IN PREVENTING FORECLOSURES

                                  ----------

                            Wednesday, May 13, 2009

                 U.S. House of Representatives,
                            Subcommittee on Housing and
                                 Community Opportunity,
                               Committee on Financial Services,
                                                       Washington, D.C.
        The subcommittee met, pursuant to notice, at 2:05 p.m., in
    room 2128, Rayburn House Office Building, Hon. Maxine Waters
    [chairwoman of the subcommittee] presiding.
        Members present: Representatives Waters, Cleaver, Green,
    Clay; Capito, Biggert, Neugebauer, Marchant, Jenkins, and Lee.
        Chairwoman Waters. Good afternoon, ladies and gentleman. I
    would like to thank Ranking Member Shelley Moore Capito and the
    other members of the Subcommittee on Housing and Community
    Opportunity for joining me for today's hearing on, ``The Role
    of NeighborWorks and Housing Counseling Intermediaries in
    Preventing Foreclosures.''
        According to the Center for Responsible Lending, there have
    been over 77,000 new foreclosures since the beginning of this
    year. The Center estimates that by the end of this year, 2.4
    million foreclosures will have occurred, with 9 million
    projected over the next 4 years.
        We know that we have to do more to not only prevent
    foreclosures, but also to ensure that the loan modifications
    and repayment plans provided to borrowers are sustainable over
    the long term.
        Nonprofit housing counselors can play an important role in
    this regard. However, many of these counselors face significant
    challenges in assisting homeowners. In spite of the mortgage
    servicing industry's claims that they are modifying more loans,
    housing counselors are still encountering uncooperative and
    unresponsive mortgage servicers.
        In fact, according to NeighborWorks' own research,
    counselors have reported that they face significant challenges
    in dealing with servicers.
        Specifically, they report that servicers are generally
    uncooperative, take at least 45 days to respond to requests,
    appear to be understaffed and overworked, and frequently lose
    documents.
        While the Making Home Affordable Program is a good start,
    it is clear that unless servicers are required to engage in
    loss mitigation, the rate of foreclosures will only continue to
    increase. Given the obstacles faced by housing counselors, it
    is important that they have the resources they need to assist
    struggling homeowners. Unfortunately, that is often not the
    case.
        In spite of the $410 million this Congress has provided for
    the NeighborWorks National Foreclosure Mitigation Counseling
    Program, adequate and equitable distribution of that funding
    remains the major concern of the national housing
    intermediaries whose affiliates provide the bulk of this
    counseling.
        These intermediaries have raised several concerns about how
    NeighborWorks' system for providing funding is impacting their
    ability to provide much-needed counseling services to
    homeowners. While I understand that funding is limited, it
    seems that some of NeighborWorks' decisions on what to fund and
    how to fund it could be having impacts on the level of
    counseling received by homeowners.
        Specifically, I'm concerned about the seeming over-reliance
    of NeighborWorks on Level 1 counseling. This is counseling that
    consists of intake and developing a budget for the homeowner.
        This type of counseling does not actually include getting a
    loan modification, or repayment plan for the services. However,
    this type of counseling makes up 69 percent of all counseling
    performed.
        Level 2 and Level 3 counseling, by contrast, are more in-
    depth and more hands-on. These are the kinds of counseling
    typically performed by some of the intermediaries who will be
    testifying later on today.
        Given the rising rates of foreclosures, I'm interested to
    hear from our witnesses why Level 1 counseling constitutes such
    a large percentage of the counseling provided.
        I'm also aware of several reimbursement issues that are
    causing difficulties for counseling intermediaries.
        For example, the number of duplicate homeowners requesting
    housing counseling services has frequently been pointed to by
    intermediaries as a leading cause for why they are underfunded.
    Duplications occur when the same homeowners contact different
    counseling agencies to receive help with their mortgages.
    However, only one housing counseling agency can receive
    payment.
        While I understand NeighborWorks' concern about the need to
    restrict funding for duplicates, there are several legitimate
    reasons why a homeowner may contact several different housing
    counseling agencies.
        First, the homeowner may have received insufficient
    counseling from one agency and is trying to procure counseling
    that is more suited to his or her needs.
        Second, the homeowner may have obtained a loan modification
    or repayment plan that was unsustainable, and may be in need of
    a new workout.
        Another reimbursement issue is that amount of funding
    provided for these housing counseling activities.
        Level 1 counseling has a lower reimbursement rate of $150
    for homeowners than Level 2, $250, or Level 3, $350 counseling.
        However, according to some of the intermediaries testifying
    today, these rates fall well short of the true cost of
    providing counseling, which actually lies between $750 and
    $1,000.
        While some intermediaries receive direct funding for
    mortgage services, and can absorb the shortfall, others cannot.
    This is an important point.
        Again, I look forward to hearing the witnesses' views on
    these very important issues.
        I would now like to recognize our ranking member.
        I'm sorry. Ranking Member Capito is ranking to Mrs.
    Biggert, but because Mrs. Biggert has another appointment she
    has to take, I will recognize her for 3 minutes.
        Mrs. Biggert. I thank the chairwoman, and I thank the
    ranking member for yielding to me, and I would also like to
    thank Chairwoman Waters for holding today's hearing and for her
    dedication to the issue of housing counseling, which I have
    been working on for it seems like many, many years.
        Most Americans can benefit from housing counseling, a kind
    of financial literacy that builds a financial foundation so
    that families can succeed as homeowners. Counselors are at the
    front lines of our Nation's housing crisis. They can help
    homeowners into a loan that best meets their budget and needs,
    steering them away from possible foreclosure down the road.
        To that regard, I would like to thank NeighborWorks and all
    of their housing counseling affiliates who have been
    spearheading efforts to help homeowners across the country keep
    their homes. Thank you.
        For the record, I would also like to thank DuPage and Will
    County of Illinois housing counselors, who put in long hours to
    help my constituents. The work of our counselors is vital to
    our housing recovery and the future of homeownership.
        Recently, for the third time, and as Title 4 of H.R. 1728,
    the House passed my bill, the Expand and Preserve Homeownership
    Through Counseling Act.
        The bill elevates housing counseling within HUD by
    establishing an office of housing counseling that expands the
    availability of HUD-approved housing counseling services,
    offers grants to State and local agencies, and launches a
    national outreach campaign.
        It requires HUD to consider appropriate ways, such as
    through technology, to streamline and improve the housing
    counseling grant process--review, approval, and award
    processes.
        The goal is to lighten the paperwork burden on counseling
    agencies, especially smaller agencies, so that they can devote
    more time and resources to counseling the homeowners.
        In that regard, I'm interested in learning about how
    NeighborWorks could partner with such an office at HUD and
    implement similar streamlining efforts. To meet the current
    unprecedented demand, we need our counselors to have the
    resources and technology available to devote time to counseling
    homeowners versus unnecessarily filling out forms.
        At the same time, the counseling agencies should be able to
    easily implement transparency measures to ensure that housing
    counselors are effectively utilizing time and resources to
    provide housing counseling to our constituents.
        In conclusion, I look forward to working with my colleagues
    on the committee, as well as the groups represented here today,
    to strengthen the housing counseling efforts across the
    country.
        With that, I yield back, and I thank you.
        Chairwoman Waters. Thank you very much.
        Mr. Cleaver, for 2 minutes.
        Mr. Cleaver. Thank you, Madam Chairwoman. Thank you very
    much for calling this hearing to deal with, ``The Role of
    NeighborWorks and Housing Counseling Intermediaries in
    Preventing Foreclosures.''
        This is unquestionably the most significantly depressed
    moment in U.S. history economically, since October of 1929,
    which launched the beginning of the Great Depression. This is
    the Great Recession, and each time unemployment rises, we can
    expect a corresponding rise in the number of foreclosures.
        And if we're going to have this kind of a problem, we have
    to make sure that the efforts by the U.S. Government to fix the
    problems do, in fact, provide remedy.
        I do understand that intermediaries have some concerns
    about how NeighborWorks distributes funds and how much is paid
    out for services rendered, and so I am anxious to hear our
    witness, Mr. Wade, today, delve into these issues.
        And Madam Chairwoman, I yield back the balance of my time.
        Chairwoman Waters. Thank you very much.
        I will now recognize Ms. Capito, our ranking member.
        Mrs. Capito. Madam Chairwoman, thank you for holding this
    hearing to assess the effectiveness of the counseling programs
    funded by the Neighborhood Reinvestment Corporation, or
    NeighborWorks, as it is now called. NeighborWorks provides a
    wide range of housing and economic services to primarily low-
    and moderate-income people.
        This could include homeownership counseling and
    construction rehab, multi-family housing production, and
    management and economic development, and there are 236 of these
    partnerships operating in thousands of communities in all of
    the 50 States, Puerto Rico, and the District of Columbia.
        All of them are independent, tax-exempt, community-based,
    nonprofit entities and use the NeighborWorks funds to leverage
    other private and public funding to achieve their mission.
        While NeighborWorks has traditionally provided housing
    counseling to home buyers and homeowners, in 2005,
    NeighborWorks turned its focus to the growing number of
    mortgage loan borrowers facing foreclosure by creating the
    NeighborWorks Center for Foreclosure Solutions.
        In 2007, Congress created the National Foreclosure
    Mitigation Counseling Program, and NeighborWorks was tasked
    with its administration.
        During the Bush Administration, NeighborWorks received $380
    million through Fiscal Year 2008, and shortly after the Obama
    Administration took over, President Obama announced his plan to
    help troubled borrowers facing foreclosure. Congress
    appropriated an additional $50 million for NeighborWorks in
    Fiscal Year 2009 in the omnibus bill.
        Counseling is an important tool in helping potential
    homeowners understand the homeownership process and where they
    are in the process. It can also help troubled borrowers facing
    foreclosure due to the loss of a job, unexpected health
    problem, or other life event creating financial hardship.
        NeighborWorks received over $410 million in counseling
    funds over the last 2 years, and I think it's important that
    Congress conduct the appropriate oversight over these programs
    to make sure the money is being used for its intended purpose,
    and specifically that funding recipients are using the funds in
    an efficient and effective manner.
        Thank you again for holding this hearing. I look forward to
    the witnesses' testimony.
        Chairwoman Waters. Thank you very much.
        Mr. Green, you are recognized for 2 minutes.
        Mr. Green. Thank you, Madam Chairwoman.
        Madam Chairwoman, I would like to associate myself with
    your comments. I think you spoke eloquently on this subject.
    And I would like to focus for a moment on the servicers.
        Madam Chairwoman, we have had hearing after hearing wherein
    the servicers have been pointed to as a source of a bottleneck
    in the process, and I am eager to hear more about this, because
    I have intelligence indicating that--as you have mentioned--it
    takes servicers 45 to 60 days or more to routinely give a
    response.
        I'm also concerned about different representatives from
    servicers giving different responses and different solutions,
    about the documentation that allegedly is being lost, about
    refinancing that is not affordable to the borrowers, and about
    the fact that modifications are often a lot less than repayment
    plans are offered.
        Many persons are upside down, and the economy and the
    housing crisis has contributed to this, and many of these
    persons can benefit from servicers that are willing to benefit
    from many of the laws that we have passed here in Congress so
    that they can help persons to make modifications such that they
    can stay in their homes.
        So again, I associate myself with your comments, and I'm
    eager to hear more about what the servicers should be doing and
    what they actually are doing.
        I will yield back the balance of my time. Thank you.
        Chairwoman Waters. Thank you very much.
        Mr. Marchant, for 1 minute.
        No? All right.
        Mr. Neugebauer?
        No? No opening statement?
        Mr. Clay, for 1 minute.
        Mr. Clay. Thank you, Madam Chairwoman, and thank you so
    much for calling this hearing today.
        Hopefully, we can get to some of the systemic causes of
    this foreclosure crisis.
        Now, we just got recently released data in the last week
    that tells us that African Americans, Hispanic Americans,
    people of color, were twice as likely to be pushed into
    subprime loans when they didn't necessarily have to have those
    subprime loans.
        So because of that was that now they are twice as likely to
    be going through foreclosure, when they didn't have to be.
        And so hopefully, this hearing today will be an airing of
    those circumstances, what caused people to go into foreclosure,
    and how we can prevent that from ever happening again.
        Madam Chairwoman, I yield back, and thank you for the
    opportunity.
        Chairwoman Waters. Thank you very much.
        And at this time, I'm pleased to welcome our distinguished
    first panel. Our first witness will be Mr. Ken Wade, the chief
    executive officer of NeighborWorks America.
        I want to thank you for appearing before the subcommittee
    today, and without objection, your written statement will be
    made a part of the record. You will now be recognized for a 5-
    minute summary of your testimony.

        STATEMENT OF KENNETH D. WADE, CHIEF EXECUTIVE OFFICER,
     NEIGHBORHOOD REINVESTMENT CORPORATION (NOW DOING BUSINESS AS
         NEIGHBORWORKS AMERICA), ACCOMPANIED BY JEANNIE FEKADE-
        SELLASSIE, PROGRAM ADMINISTRATOR, NATIONAL FORECLOSURE
                     MITIGATION COUNSELING PROGRAM

        Mr. Wade. Thank you, Chairwoman Waters.
        I am pleased to be able to be here before the committee and
    Ranking Member Capito, to highlight the successes of
    NeighborWorks America's efforts in the foreclosure mitigation
    area, and particularly NeighborWorks' efforts to administer the
    National Foreclosure Mitigation Counseling Program.
        Given the limited time, I will be brief in my oral remarks,
    allowing for ample opportunity for committee members to ask
    specific questions, but my written testimony does include an
    extensive program overview and information in response to a
    series of questions that we did receive from the committee.
        So in my oral remarks, I'll provide a brief background on
    NeighborWorks America, touch on some of our broader efforts to
    address the current foreclosure crisis, and then focus the
    remainder of my statement on discussing the National
    Foreclosure Mitigation Counseling Program.
        I do also have with me the person who administers that
    program on a day to day basis, Jeannie Fekade-Sellassie. She's
    right behind me here. And I may from time to time turn to her
    for responses that might be more detailed and would require me
    to consult with her.
        NeighborWorks America, as you know, was established in 1978
    by Congress. We receive an annual appropriation from the
    Transportation, Housing and Urban Development, and Related
    Agencies Appropriations Act.
        Our board of directors is made up of representatives of the
    Federal financial regulatory agencies--the Federal Reserve
    Board, the Federal Deposit Insurance Corporation, the
    Comptroller of the Currency, the Office of Thrift Supervision,
    and the National Credit Union Administration, along with HUD.
        The primary mission of our organization is to extend
    affordable housing opportunities, both rental and
    homeownership, and to strengthen distressed urban, suburban,
    and rural communities across America.
        Much of our work is carried out through the NeighborWorks
    network, which is comprised of 235 affiliated community-based
    organizations serving more than 4,500 urban, suburban, and
    rural communities in all 50 States, Puerto Rico, and the
    District of Columbia.
        With the growing foreclosure crisis, NeighborWorks America
    expanded its efforts on behalf of the Nation's neighborhoods.
    Throughout our history, we have had an opportunity to support
    community-based practitioners as they work to improve their
    communities; and because of our work and presence in those
    communities, we were an early leader in calling out the growing
    problem of foreclosures.
        We started the NeighborWorks Center for Foreclosure
    Solutions more than 5 years ago. We have been a national leader
    in training and certifying foreclosure counselors. We have
    convened groups to establish the national industry standards
    for housing and foreclosure counseling.
        We have supported local and Statewide foreclosure
    coalitions in areas that have been hard-hit by the foreclosure
    crisis, and we sponsored a public education outreach campaign
    to reach troubled borrowers.
        Let me just summarize briefly our results to date in the
    national foreclosure mitigation counseling program.
        To date, a total of $410 million has been appropriated, and
    the first appropriation required that we distribute a minimum
    of that funding, $50 million, within 60 days of award, and
    NeighborWorks was able to award $130 million in the first 60
    days. This included designing the program from scratch,
    identifying the eligible applicants, and doing all the work to
    get a program up and running.
        Because Congress' funding to NeighborWorks provided funding
    for training as well, we were able to provide training to 1,600
    counseling organizations throughout the country. We funded the
    counselors who have assisted more than 410,000 families facing
    foreclosure to date.
        The majority of the people counseled have been minorities,
    53 percent. NFMC grantees also are doing well in serving areas
    that were targeted by subprime and predatory lenders. Thirty-
    seven percent of the clients are in ZIP Codes where the
    majority of clients are minorities. Forty-two NFMC grantees
    said that they would target their services also to low- and
    moderate-income minority neighborhoods or homeowners.
        One of the key statutory requirements that Congress had was
    for the NFMC program to ensure that a substantial portion of
    the funding went to areas of greatest need.
        I see I am running out of time here. So let me just say, we
    have had overall great success with the program, we have
    learned a lot in trying to administer this program, and we look
    forward to whatever questions the committee might have.
        [The prepared statement of Mr. Wade can be found on page
    102 of the appendix.]
        Chairwoman Waters. Thank you very much. I appreciate your
    being here today.
        I will recognize myself for 5 minutes.
        Most of what I'm concerned about I placed in my opening
    statement, but let's get right to this funding issue.
        Mr. Wade. Sure.
        Chairwoman Waters. I could go into long detail about the
    counseling services and where I think the strengths and
    weaknesses are, but let's deal with this duplication issue.
        Will you explain to us how you determine that there are
    duplicative services, and how you pay, and who gets paid?
        Mr. Wade. Sure. The program was designed to ensure that we
    could get the maximum number of borrowers served with the
    funding that was provided, so what we did was set up a program
    that reimbursed the counseling organizations based on their
    number of consumers served, and the level of service that they
    provided to those homeowners.
        We also wanted to ensure again that we could serve the
    maximum number of customers or borrowers, and so we did not
    allow organizations to serve, or we did not allow a consumer or
    borrower to be served more than by one organization except for
    in one case, where a borrower might receive a Level 1
    counseling service, and would then be eligible to receive a
    Level 2 service from another organization or for the same
    service.
        Chairwoman Waters. How do you determine that?
        Mr. Wade. That is determined based on the date that the
    organizations essentially upload the data into the system that
    would then determine who would get the reimbursement for that
    particular homeowner. So it would be a first-come-first-served
    basis.
        Chairwoman Waters. Technologically, how do you determine
    that?
        Mr. Wade. That's based on the date that the organization
    puts the person counseled into the system, because they're
    required to report on a per-homeowner basis.
        Chairwoman Waters. So how do you see, if there are two or
    three organizations who have served this person, how is that
    determined?
        I know it's determined by date. So everything comes to you
    by date, and you have a computer model of some kind--
        Mr. Wade. Yes.
        Chairwoman Waters. --that kicks out the duplication? Will
    you explain that to us?
        Mr. Wade. Sure. What happens is that we use a third-party
    vendor. The organizations are required to upload their data
    into the system. It records the date that a borrowers
    information is recorded, and the organization that submits that
    homeowner into the system first is the person that would get
    credited for serving that borrower.
        Chairwoman Waters. Who is your vendor?
        Mr. Wade. Socialserve. We did a competition to select a
    vendor to build this system. We didn't want to create a
    permanent infrastructure--
        Chairwoman Waters. How much did they charge you for this?
        Mr. Wade. Offhand, I don't know the charge for--
        Chairwoman Waters. Ask the young lady behind you--
        Mr. Wade. --but I do know that--do you know?
        Yes. We didn't bring that, but as you might recall, we were
    restricted in the amount of money we could use to administer
    the program, so all of that is within the cost of the
    administrative cap of 4 percent that was imposed on the
    administration of the program.
        Chairwoman Waters. All right. We're also hearing that many
    intermediaries believe that NeighborWorks favors Level 1
    counseling, which is not as in-depth, over Level 2 counseling.
        In your opinion, does NeighborWorks place more of an
    emphasis on Level 1 counseling? If so, what implication does
    this have for reducing foreclosures?
        I understand 69 percent of the counseling is in Level 1. Is
    that true?
        Mr. Wade. Sure. And we don't favor the level of counseling.
    All of that is determined by the local organization. They
    proposed the level of counseling that they would provide when
    they made their application, and they're allowed to upload
    borrowers into the system based on how they have served the
    customer.
        So we don't play any role in choosing how they serve the
    customer. That's totally driven by the--
        Chairwoman Waters. So do they have to determine when they
    first sign up, for lack of a better description, what level
    they want to deal with, and are they locked into that level?
        If I sign up, and I say, ``I want to do Level 1, because
    that's all I know and understand,'' and then I discover that,
    really, I can do Level 2 or 3, how do I rearrange my contract
    so that I could do that?
        Mr. Wade. That is a good question. The organizations did
    propose, on the front end, what they would propose to do.
        Chairwoman Waters. Yes.
        Mr. Wade. In most cases, the Level 1, the number of Level 1
    counseling units delivered are larger than what was originally
    proposed by the organizations who have been funded, and I think
    some of the organizations would be better prepared to tell you
    what some of the challenges have been with ending up with more
    Level 1s than they had initially expected.
        Chairwoman Waters. So you're saying that, in addition to
    those who signed up for Level 1, some of those who said, ``I
    can do 2 and 3,'' are now doing more Level 1s?
        Mr. Wade. Yes. And we--
        Chairwoman Waters. Do you have any way of correcting that--
        Mr. Wade. Yes.
        Chairwoman Waters. --so that you can get more to the
    modifications work with the servicers?
        Mr. Wade. We allow the organizations a 50 percent variance,
    because again, we allow them to respond to the homeowners that
    they encounter, and determine the level of service that they
    think is appropriate for them.
        So we give them wide latitude over the original proposed
    way that they had structured their program, given, you know,
    the challenges with any new program.
        Chairwoman Waters. All right.
        And lastly, I understand that some of those providing
    services also are getting paid by the servicers $1,000 when
    they can accept the $1,000 plus whatever you pay, also?
        Mr. Wade. We have limitations in the program that do not
    allow--will have a limited number amount of reimbursement that
    an organization can receive--
        Chairwoman Waters. What does that mean?
        Mr. Wade. --for a specific homeowner that they have
    received reimbursement from the program.
        Chairwoman Waters. So if you have an organization that is
    receiving monies from the servicers, $1,000, how many $1,000
    reimbursements can they receive?
        Mr. Wade. Sure.
        Chairwoman Waters. What percentage?
        Mr. Wade. Sure. So the way that we have structured the
    program, they are limited to take from the foreclosure
    mitigation program the amount that we reimburse, and then they
    could take from the servicer only an amount up to and what it
    cost for them to provide the service.
        And we do require that they bill the servicer first if they
    have that arrangement. So, in other words, the public money is
    used as a last resort.
        So as an example, there are a number of organizations that
    had relationships with servicers before this program got up and
    running.
        Chairwoman Waters. My question is, do they get that $1,000
    in addition to reimbursement from you if they're doing Level 1,
    2, or 3 under your definition?
        Mr. Wade. No, they would not.
        Chairwoman Waters. So--
        Mr. Wade. They can receive reimbursement for homeowners
    that they have not billed NFMC for.
        Chairwoman Waters. Well, maybe we'll get into that a little
    bit more.
        Thank you very much. I will now recognize Ranking Member
    Capito.
        Mrs. Capito. Thank you. Thank you.
        Mr. Wade, can you explain to me the $410 million at
    NeighborWorks, and I know that's a conglomeration of a couple
    different pots of money, and in your notes, it goes to 230
    nonprofits.
        Then, does it then go to other organizations from there? So
    does it pass through more than one?
        What I'm trying to get here is--
        Mr. Wade. Sure.
        Mrs. Capito. --I know you're limited to 4 percent
    administrative, but how many other administrative costs are
    loaded onto this by the time it actually gets to the consumer?
        Mr. Wade. The way this program is structured, there were
    eligible applicants prescribed in the legislation, so those
    included HUD-approved housing counseling intermediaries, and I
    think there are about 21 or so in total in the country; every
    State housing finance agency was eligible; and then
    NeighborWorks organizations who were part of that 235
    organizations in our network.
        The national intermediaries and the State housing finance
    agencies, many of them have sub-recipients who actually carry
    out the counseling activities, and so they were responsible for
    setting up the program, assembling a number of sub-grantees,
    and then passing the funding on to those organizations to
    actually carry out the program.
        Mrs. Capito. So would there be an administrative fee, then,
    for them, as well?
        Mr. Wade. Yes.
        Chairwoman Waters. What is that percentage, do you know?
        Mr. Wade. It is 5 to 7 percent, so that we limited the
    administrative cost to the State housing finance agencies and
    the intermediaries to anywhere from 5 to 7 percent, and each of
    them proposed in their application what percentage they would
    request in order to carry out the program.
        And that's essentially to deal with the reporting
    requirements they're responsible for, the program
    administration costs that they have, and the follow-up and the
    documentation that they to do to ensure that the grantees are
    in compliance.
        Mrs. Capito. Okay. Now, I'm kind of picking up from your
    comments that people are--that the organizations are
    reimbursed; in other words, you perform the service, and then
    you're reimbursed for it. Is that correct?
        Mr. Wade. Well--
        Chairwoman Waters. Excuse me. Before answering that, I have
    never done this before, but I'm going to interrupt.
        Mrs. Capito. Okay.
        Chairwoman Waters. There are less than 5 minutes on the
    vote, and you can pick it up and complete your question when we
    return.
        I would like to ask for your patience while we take three
    votes, and we will be right back. Thank you. The hearing is in
    recess.
        [recess]
        Chairwoman Waters. Ms. Capito, I interrupted you when you
    were in the middle of your question, so you can start off again
    with your 5 minutes.
        Mrs. Capito. Thank you, Madam Chairwoman. Thank you.
        I believe, as I recall where we were, I was asking you when
    somebody comes in for, or somebody, a client gets, say, the
    Tier 1 counseling, then is the organization reimbursed after
    the counseling occurs when they report?
        Mr. Wade. Right. That's a good question. The reimbursement
    level is based on the level of service.
        Mrs. Capito. Right.
        Mr. Wade. But clearly, in the first draw, an organization
    actually receives 68 percent of their total award at first--
    excuse me--at second draw.
        Yes, the first draw is--
        Mrs. Capito. What?
        Mr. Wade. We have three draws, a four draw schedule set up.
        Mrs. Capito. Oh.
        Mr. Wade. At first draw, once you execute the contract and
    all of the paperwork is in order, you draw down 40 percent of
    your total award before you have delivered any service.
        Then at draw two, you're able to draw down 68 percent of
    your total award.
        But the reimbursement is based on a per homeowner
    reimbursement level, and it's reconciled to ensure that
    basically, at the end of draw four, you will not exceed the
    total amount of your award.
        So you're always in a forward-funded position. That was one
    of the things that groups were concerned about, would there be
    an opportunity to have funding up front in order to get
    started, even though the reimbursement was based on a per
    homeowner basis.
        Mrs. Capito. So when the grant is given, you're estimating
    the number of people they would serve?
        Mr. Wade. Yes, absolutely.
        Mrs. Capito. Okay. And what if they don't meet those
    expectations? Then in the fourth tranche, they don't get their
    final--
        Mr. Wade. Right, right. So the idea--
        Mrs. Capito. Is that a year schedule for--
        Mr. Wade. I'm sorry?
        Mrs. Capito. A disbursement schedule over a year, or over 6
    months, or--
        Mr. Wade. Well, it's based on the level of programmatic
    activity that they have achieved.
        So, for instance, for level--the second draw, once an
    organization achieves, yes, 25 percent of their units of
    service, then they're allowed to take the second draw.
        Mrs. Capito. Okay. So that's an accountability measure for
    you--
        Mr. Wade. Yes.
        Mrs. Capito. --and a transparency measure. I appreciate
    that.
        Mr. Wade. Right.
        Mrs. Capito. I noticed that of the $180 million that was
    funded through the NFMC, $30 million of that was for legal
    services.
        Mr. Wade. Yes.
        Mrs. Capito. Can you tell me how you're tracking that, how
    that has been expended--
        Mr. Wade. Sure.
        Mrs. Capito. --and any other information about--
        Mr. Wade. A little bit. Sure.
        Now, that funding had a limitation on what it could be used
    for. It was not allowed to be used for any civil litigation. It
    could be used to assist a homeowner who had any other variety
    of issues that might need legal consultation.
        The funding goes--
        Mrs. Capito. Surrounding the purchase of a home, or I mean
    surrounding--
        Mr. Wade. No, no, around--
        Mrs. Capito. --their foreclosure?
        Mr. Wade. --around their foreclosure--
        Mrs. Capito. Not other issues?
        Mr. Wade. Right. No, no. You're absolutely right. Around
    foreclosure-related issues.
        So, for instance, there were consumers whom a counselor
    might have thought had been defrauded, as an example, so you
    could consult a legal organization in order to help you
    understand whether there might be a cause of action that could
    be brought on behalf of that homeowner.
        Mrs. Capito. How much of that has been expended, do you
    know?
        Mr. Wade. We have awarded roughly $25 million of it; $5
    million was returned to the Treasury because there was a lack
    of demand for that in the second round of applications, so we
    did not fully award the total $30 million. And so roughly $25
    million was awarded.
        Mrs. Capito. Could those go to like a legal aid or
    something of that nature?
        Mr. Wade. Well, the organizations were the eligible
    applicants, so they had to be the counseling organizations that
    actually received the funding.
        They could, in partnership with a legal aid organization,
    pay the legal aid attorneys to do the work. They could hire
    attorneys themselves. We allowed either arrangement.
        Mrs. Capito. Okay. Last question on the servicers.
        I think that's a real sore spot in terms--I know in my
    office, trying to help people reach their servicer is very
    difficult and frustrating, and then a lot of strong-arming or,
    you know, at least not being able to get the answers quickly,
    and I noticed that's part of the complaints by a lot of the
    counselors, where the weaknesses are.
        What steps should be taken to help mitigate this problem?
        Mr. Wade. Well, clearly, one of the things that will be
    helpful, we assume, would be the new program that has been
    rolled out.
        Up until this point, there had not been a widespread
    program that most servicers subscribed to. There were a lot of
    initiatives that one servicer or one lender might have, but was
    not broadly available.
        You also had the complication of servicers who typically
    service for a variety of investors, all of whom had different
    rules, and that created confusion, additional time and energy
    for both servicers to sort through what they could do with a
    customer who might be in a loan that was owned by Fannie Mae or
    Freddie Mac versus something that was in a private label
    security, and those caused complications, as well.
        So we think the new program will go a long ways toward
    helping address that. We also assume that the incentive
    payments that are being paid to servicers through the TARP
    program give them an additional incentive to get consumers
    either refinanced or modified. So we think that will be a great
    help.
        And presumably, that additional funding will also help them
    address the capacity challenges, because I mean, at some point,
    at the end of the day, it just seemed like they didn't have
    enough people to deal with the demand as it scaled up.
        Mrs. Capito. Okay. Thank you, Madam Chairwoman.
        Chairwoman Waters. You're welcome.
        Mr. Cleaver, for 5 minutes.
        Mr. Cleaver. Thank you, Madam Chairwoman.
        Mr. Wade, thank you for being here.
        Are the individual intermediaries who provide telephone
    counseling compensated at the same rate as those who perform
    face-to-face counseling?
        Mr. Wade. That's a good question.
        I mean, really, we have organized the reimbursement based
    on the level of service you provide, irrespective of modality.
    So Level 1 can be delivered by telephone or in person, as can
    the other levels of counseling, as well. So it's not tied to
    whether it's telephonic or in person. It's the level of service
    you provide the homeowner.
        Mr. Cleaver. Do you have any data that would suggest that
    either of the services, either by telephone or in person, is
    more impactful? You know, when you audit the program at the end
    of the year, I mean--
        Mr. Wade. No, that's a good question.
        One of the challenges we have right now is, we don't get
    performance data from the servicers, so we have hired Urban
    Institute to use a third-party service that all the servicers
    report in to, that has loan performance in it.
        We will be doing matches with the homeowners assisted
    through this program to be able to track the performance of
    those homeowners over time. So we will be in a position to
    answer that question more definitively.
        We have a preliminary report where they have done some
    preliminary matches that we think we'll be able to release by
    the end of this month that will give us some initial data, but
    I would say the early matches have suggested that about, in
    total, about 76 percent of the homeowners who have been helped
    in this program, or have been counseled, are still in their
    homes.
        Now, we don't have that broken out by type of service, but
    we will be able to do that.
        Mr. Cleaver. Madam Chairwoman, I don't know when that
    information would be available to the committee, but if the
    Chair would so embrace, I would love to have some information
    on that research as soon as possible.
        Mr. Wade. Yes.
        Chairwoman Waters. Thank you very much.
        The Chair will, for the record, ask that the research be
    submitted to us--
        Mr. Wade. Sure, absolutely.
        Chairwoman Waters. --as soon as possible.
        Mr. Wade. Absolutely.
        Mr. Cleaver. It's all trying to make sure that, at this
    difficult moment economically, we do what is working.
        Do you encourage the borrower to contact the community-
    based agencies who are providing the service?
        Mr. Wade. Absolutely. I mean, NeighborWorks, we do provide
    a Web site where a consumer can go and look up the local
    organization that's closest to them. We also refer consumers to
    the homeownership preservation homeowners hotline.
        And so we provide the opportunity to refer borrowers to the
    range of counseling opportunities that are available to them.
        Mr. Cleaver. Other than public service announcements, and I
    have heard a few in Kansas City--we have an agency in Kansas
    City that does, in fact, subcontract with you.
        But other than the public service announcements I have
    heard, and of course I'm only home on the weekends, but I have
    not seen any other advertisement that would attract people who
    are in trouble to go to them.
        In the budget, are there dollars expended for getting the
    word out?
        Mr. Wade. Right. We have in the grants that were made to
    the eligible applicants, they are allowed to use a portion of
    those grant funds for outreach.
        We have, through our own efforts as well, contributed to a
    range of outreach efforts. We have worked with local
    organizations to do local outreach fairs.
        We have done work with local organizations to do local
    telethons, to provide literature or resources so they could do
    door-to-door outreach. We have done a couple of telethons with
    Univision, one in Boston and I don't remember where the other
    one was offhand, in order to reach borrowers.
        So we're trying a variety of means. I would say we have not
    done anything in any extensive way to do paid advertising.
        That's very expensive, and so we have not spent any money
    on paid advertising, other than maybe a few times when we might
    have been participating, and folks bought an ad in a local
    community-based newspaper or something like that.
        Mr. Cleaver. Well, I just think marketing is so critically
    important in this arena. It's amazing how little, I mean, with
    all of the modes of communication we have today, it's amazing.
        Congressman John Lewis was asked the question, at a town
    hall meeting, ``Do you live in the White House?'' And of
    course, he told them no.
        But at a time when all this information seems to be
    available, the truth is, it seems that no information is
    available.
        I run into people over and over and over again who are
    unaware of the program, in spite of the fact that I know in
    Kansas City, the agency involved is doing everything all day,
    24 hours a day, but it doesn't seem to be resonating like it
    should, and I would just suggest that we think about marketing.
        I yield back--I don't have any more time.
        Chairwoman Waters. Thank you, Mr. Cleaver.
        Mr. Green.
        Mr. Green. He yields back the time that he has borrowed.
    Thank you.
        And, Mr. Cleaver, am I to understand that Mr. Lewis has
    moved out of the White House?
        Thank you for appearing, Mr. Wade. I will try to be as
    brief as possible.
        But I do want to know if I am getting some sort of mixed
    signal, because on the one hand, we get indications of
    servicers wanting to modify, not refinance, not give a payment
    plan, but wanting to modify, and on the other hand, I have
    information here today indicating that there is some degree of
    difficulty associated with getting modifications.
        So which is correct, please?
        Mr. Wade. Well, early on, when this program first began,
    there were only a handful of modification programs out there
    that were substantially reducing the payments of homeowners. I
    think that's a fact.
        So early on in the program's history, the vast majority of
    modifications offered to homeowners were basically repayment
    plans, and they were probably not sustainable, although our
    data will probably help validate that.
        Over time, as new programs were introduced, more servicers
    were providing more substantial modifications.
        And I would say it really wasn't until the IndyMac program
    that got initiated by the FDIC, was there, in a sense, with the
    whole portfolio, an approach that created a modification
    opportunity that was driven by the borrower's ability to pay.
        And I think that's the standard that was set with the
    IndyMac program, that was built on based on the new
    Administration's program.
        Mr. Green. If I may, are you receiving some resistance, no
    resistance? Kindly give me some indication as to what the
    circumstance is.
        Mr. Wade. The interface with the servicers is still a big
    problem. So even with the new program, it's--you know, we had a
    feedback session again with some counseling organizations last
    week.
        A number of them indicated that even though many of the
    servicers have signed up for the Administration's program, when
    they contacted the servicer to get their, you know, borrower
    engaged, they were told that, ``We have signed up, we're not
    ready yet, our systems aren't up and running yet.''
        So I think there are still challenges with the servicers,
    no question about it. It's still a problem.
        Mr. Green. Have you received any intelligence indicating
    that servicers may have been amenable, or maybe I should say
    more amenable, to modification when there was the possibility
    of the bankruptcy option, and now that the possibility has been
    removed, there is less compliance, or less of a desire to
    modify?
        What I'm getting at is very simply this: Did bankruptcy
    have an impact, the possibility of bankruptcy have an impact on
    the behavior of servicers?
        Can you kindly respond?
        Mr. Wade. We have not done anything to do any broad-based
    survey in that regard.
        Mr. Green. Any anecdotal?
        Mr. Wade. Right. No, no.
        I have been on a couple of panels, in places where
    servicers have participated, and there was an assumption that,
    if homeowners were allowed to have their principal residence
    considered in bankruptcy, that it would create a backstop that
    would motivate more servicers to be more aggressive with their
    modifications.
        Mr. Green. Thank you, Madam Chairwoman. I'll yield back.
        Chairwoman Waters. Thank you very much.
        I would like to yield to each member additional time. We
    have so few members here today.
        And I yield to myself an additional 2 minutes, because it's
    very important for us to learn more about what is happening
    with NeighborWorks, because of the concerns that have been
    raised in several quarters.
        First, I would like to ask you, for those counseling
    agencies that put a value on their work, and they are getting
    paid from the servicers, if they say that their work is worth
    $1,000, and the servicers give them $600, can they get a
    maximum, what, $350, from you to make up for what they value
    their services at?
        Mr. Wade. Well, I think theoretically, they could, in this
    regard. The program is designed--
        Chairwoman Waters. Not theoretically. What are the rules?
        Mr. Wade. Well, when I say, the rules are that an
    organization that has a contract with the servicer must take
    the servicer payment first.
        If that does not fully cover their costs, then they can
    also bill the NFMC program for the balance of what their total
    costs might be.
        Chairwoman Waters. So you have some counselors who are
    making a lot more money than other counselors?
        Mr. Wade. We don't think that is the case, because we have
    done 179 on-site compliance reviews, and in no case in those
    reviews were any of those groups billing the NFMC program and
    receiving a payment from the servicer for the same client.
        So we do monitor that, because we want to ensure that,
    number one, the taxpayers' money is the last--
        Chairwoman Waters. Of course, but what I'm asking, what I
    really want to know is what the rules are, if, in fact, they
    say, ``My services are worth $1,000,'' and they have a
    contract--I don't know what the contract says, with the
    servicers. The contract should cover whatever it is they agreed
    upon.
        But if the servicer says, ``I'm not paying you $1,000,''
    and they bill you $350 of that, they can get the $650 or
    whatever from the servicer plus $350 from you, if they decide
    to ask you for it?
        Mr. Wade. Yes, I would say the rules probably do permit
    that, but again, we have had no occasion from our on-site
    reviews where that has been the case, and we have been pretty
    clear in the program guidance that there are limitations on
    what this program is willing to reimburse for the services
    provided.
        Chairwoman Waters. Okay, I don't quite understand your
    answer.
        If those are the rules that they are working by, you are
    saying that they don't really apply the rules, and they don't
    ask for what the rules say they can have, but that's a part of
    the rules, that they could do that?
        Mr. Wade. Well, I would say this. A group would have to
    demonstrate that what they are providing, just as an example,
    to follow your example, say that they say that what they do
    costs $1,500, they would have to document that and we would
    have to accept that it was accurate and appropriate--
        Chairwoman Waters. Can all of the counselors in the program
    do that, or just certain ones who have contracts with
    servicers?
        Mr. Wade. Now, do which piece? The--
        Chairwoman Waters. Does everyone have the opportunity to
    request reimbursement from the servicers and from you?
        Mr. Wade. Yes. Yes. Everyone has that opportunity.
        I mean, if they have an agreement with the servicer, we
    don't control that--
        Chairwoman Waters. So everyone does not have that
    opportunity? For those counselors who don't have contracts with
    servicers, they cannot get the same amount that someone else is
    getting because they have a contract? Is that right?
        Mr. Wade. That is true. That is true.
        Chairwoman Waters. Okay. Secondly, let me ask, you talked
    about the HUD-approved counselors, the housing finance
    agencies, and NeighborWorks.
        Do your reimbursements work the same for each of these
    agencies?
        Mr. Wade. Yes. Exactly the same. There's no difference.
        Chairwoman Waters. Okay--
        Mr. Wade. Well, only in one case. The intermediaries and
    the State housing finance agencies get an additional amount.
    They can bill up to 7 percent for administrative--
        Chairwoman Waters. Why?
        Mr. Wade. Because they are typically administering a
    program that has sub-recipients, and so we allowed for that.
        So for instance, NeighborWorks organizations are only
    allowed reimbursement on a per-person basis up to now, in round
    two, the $450, and an additional 20 percent for programmatic
    support, as all counseling agencies can receive, and then the
    State housing finance agencies and national intermediaries are
    also allowed up to an additional 7 percent to administer a
    group of sub-recipients.
        Chairwoman Waters. Let me just move on, and I want to note
    that, so that we can take a closer look at that.
        Intermediaries are also concerned that NeighborWorks'
    various reporting requirements are confusing, change frequently
    without notice, and are time-consuming, and punitive.
        For example, if one field is left unfilled, the
    intermediary won't be paid. So they do the work, they submit,
    and they have fields that they have to fill out, or close in,
    or however you do it. If one is left unfilled, then what do you
    do, kick it back to them?
        Mr. Wade. We have a number of fields that they are required
    to report. There are some fields that are optional.
        The required reporting elements are required to be
    completed before they are allowed to get reimbursed for the
    service provided.
        Chairwoman Waters. Did you recently change your guidelines
    so that a number of these counseling agencies had to re-enter
    their 600 data files?
        Mr. Wade. Well, we--how many data files, I'm sorry?
        Chairwoman Waters. Six hundred.
        Mr. Wade. I'm not aware of the number of--
        Chairwoman Waters. Did you recently change some guidelines?
        Mr. Wade. We have made some changes. For round two, we did
    add some additional data elements, because there were some
    additional requirements that came with the second round of
    funding, that we had to include.
        We did make some changes in round one to allow a little
    more flexibility, so there were some data elements that started
    out as being required, that we moved to optional in order to
    give groups additional flexibility.
        Chairwoman Waters. So the question becomes, when you make
    changes, and your counseling agencies don't know about those
    changes, they are not informed in a timely fashion, if they
    submit under the old rules, are you penalizing them?
        Mr. Wade. No, we give groups adequate notice on changes
    that are made to the reporting, and we don't penalize groups.
        We always allow groups to--so, for instance, if you submit
    information on a client and it's not complete, you are
    notified, and you have the opportunity to correct that and get
    it back in the system so you can get reimbursed.
        Chairwoman Waters. Okay. Thank you very much. We appreciate
    your being here today. We will continue our questioning with
    the next panel, unless we have members who have additional--
    yes?
        Mr. Green. I have. Yes, thank you.
        Chairwoman Waters. Yes, please, Mr. Green.
        Mr. Green. Thank you, Madam Chairwoman.
        Mr. Wade, let's quickly visit on the question of diversity
    within your business model. I'm talking now about Asian
    Americans and Pacific Islanders, specifically, as well as
    others.
        But can you address the question of diversity in terms of
    how you're able to communicate with communities that have rich
    cultures, but require, I think, some linguistic talents
    available to them?
        Mr. Wade. Well, we did ask all organizations to clarify the
    population groups they were going to serve, what language
    capacities they had to serve that client base, and we took that
    into account in both the awards that were made, and we do, you
    know, obviously capture demographic information on who the
    agencies have served.
        Mr. Green. Have you made awards to organizations that are
    identifiably Asian American or Pacific Islander, in terms of
    the community that they will perform outreach to?
        Mr. Wade. We have done a few awards to NeighborWorks
    organizations who fit that category.
        As I recall, none of the State housing finance agencies or
    HUD intermediaries would qualify as Asian American or Pacific
    Islander organizations.
        Mr. Green. And is there some reason why they wouldn't
    qualify?
        Mr. Wade. Well, just, they're not--no one has become a HUD
    housing counseling intermediary, so that was a limitation in
    the legislation.
        Now, there are sub-recipients of State housing finance
    agencies and the other intermediaries who would qualify as
    organizations based in that community, but there is no--there
    are no HUD housing counseling intermediaries that meet that
    qualification.
        Mr. Green. Because my time is up, let me just ask if you
    would, in writing, give me the list of those that cater to the
    communities that I have called to your attention?
        Mr. Wade. Sure. Absolutely.
        Mr. Green. All right. Thank you very much. Thank you, Madam
    Chairwoman.
        Chairwoman Waters. Thank you very much.
        Mr. Cleaver, did you have any additional questions?
        Mr. Cleaver. One question, Madam Chairwoman. Thank you.
        One of the problems we have, and our Chair has been dealing
    with this, in the Financial Services Committee, we try to get
    small, minority businesses involved, and one of the problems we
    always run into is the payment schedule.
        You know, you have a subcontractor who is doing work for a
    major, and if they are 45 days late, you know, paying the
    subcontractor, it could almost put him or her out of business.
        And I guess the same question I'm asking of you, about
    those who are involved in the program, is there any undue
    length of time between the time there's a submission or an
    invoice--I don't know how--
        Mr. Wade. Absolutely. I understand the question.
        And we provided guidance to all the national intermediaries
    that they should provide reimbursement to the sub-recipients
    within 14 days, because we did understand the challenge with
    smaller organizations who, you know, are trying to provide this
    service--
        Mr. Cleaver. Is it happening? Do you know--
        Mr. Wade. We do understand that there are a couple of State
    housing finance agencies that have chosen to do this on a
    strictly cost-reimbursement basis, but otherwise--
        Mr. Cleaver. That should be unacceptable.
        Mr. Wade. Right.
        Mr. Cleaver. That's unacceptable. I mean, we can run people
    out of business.
        Mr. Wade. Right.
        Mr. Cleaver. And these are not-for-profit agencies, which
    means they don't have a reserve, or anything else. I don't know
    how we address this, but I really--
        Mr. Wade. We did learn that recently, in a debriefing
    session that we had. We are going to follow-up with those
    couple of State housing finance agencies to understand exactly,
    you know, what's going on there. And we are considering whether
    there are additional requirements that we need to develop in
    order to address that issue.
        Mr. Cleaver. Thank you, Madam Chairwoman.
        Chairwoman Waters. Thank you very much.
        And again, I appreciate your testifying before us today,
    and I assure you that one of the things we're going to have to
    do is to make sure that the complaints that we are getting are
    followed up and investigated, for those agencies who feel that
    they are not being paid properly, that their work has been
    consigned to the Number 1 level, etc., and they feel that other
    agencies are getting paid more, or you have this business about
    those who are contracting with servicers getting paid more.
        We really do have to make sure that we have fairness and
    equality in the payment for these services. Otherwise, this
    whole thing is going to unravel.
        Thank you very much for being here today.
        The Chair notes that some members may have additional
    questions for this witness, which they may wish to submit in
    writing. Without objection, the hearing record will remain open
    for 30 days for members to submit written questions to this
    witness and to place his responses in the record.
        This panel is now dismissed, and I would like to welcome
    again the second panel: Ms. Colleen Hernandez, president and
    CEO, Homeownership Preservation Foundation; Ms. Susan Keating,
    president and CEO, National Foundation for Credit Counseling;
    Ms. Lisa Hasegawa, executive director, National Coalition for
    Asian Pacific American Community Development; Mr. Cy
    Richardson, vice president, housing and community development,
    National Urban League; and Ms. Janis Bowdler, associate
    director, Wealth-Building Policy Project, NCLR.
        Thank you all for being here today.
        Again, without objection, your written statements will be
    made a part of the record.
        You will now be recognized for a 5-minute summary of your
    testimony, starting with Ms. Colleen Hernandez.

     STATEMENT OF COLLEEN HERNANDEZ, PRESIDENT AND CHIEF EXECUTIVE
             OFFICER, HOMEOWNERSHIP PRESERVATION FOUNDATION

        Ms. Hernandez. Thank you, Madam Chairwoman.
        I am president of the Homeownership Preservation
    Foundation, and I certainly appreciate the opportunity to
    testify today, along with my colleagues in the housing
    industry, to share some of the challenges that we face in
    serving homeowners.
        My group was formed in 2003, and our mission is to be the
    trusted ally to the homeowner, providing help and hope and
    support for folks facing foreclosure.
        We own and operate the Homeowner's HOPE Hotline, 888-995-
    HOPE, which provides free telephone counseling service to
    distressed homeowners. The hotline operates 24/7, all over
    America.
        In the last 16 months, we have counseled 486,000
    homeowners. On an average day now, we receive 7,000 calls.
        So today, I would like to discuss how and where we do our
    work, where our funding comes from, what results we produce,
    and what challenges we face.
        How does the hotline work? When you dial this number, you
    talk to a call center worker who answers your questions. About
    30 percent of the people who call simply have questions. And
    then they dispatch the call to counselors.
        Now, we give all homeowners a choice. We say to them when
    they want counseling, ``Would you rather have face-to-face
    counseling or telephone counseling?''
        If they say face-to-face counseling, our locator database
    finds the counseling agencies who have asked us to receive
    calls, and tells the caller what the three closest agencies to
    them are.
        If they choose a telephone counselor, they're connected to
    one of our 600 counselors at 9 HUD-approved nonprofits in our
    network: Auriton; Springobard; Novadebt; Money Management
    International; Greenpath; By Design; and the Consumer Credit
    Counseling Services of Atlanta, San Francisco, and Dallas.
        Our counselors are the trusted allies of homeowners. As a
    reference, I provide in the packet the information, an article
    in the Washington Post that describes a day in the life of a
    hotline counselor, and what transpires during a counseling
    session.
        Counselors basically listen to the story of the homeowner.
    They say, ``You're behind in your mortgage. What happened?''
    And then they listen for as long as it takes to that story, and
    within the story are the nuggets of the solution.
        After that, they review, in great detail, the income and
    expenses, and during that time, the light bulbs begin going off
    in the mind of the homeowner about the choices that they have
    on how they earn their money, how they spend their money, and
    how they might dedicate more resources to their mortgage.
        We are a trusted third party that takes fresh eyes and an
    independent look at their options and helps them determine the
    best bet for saving their home. We are also a bridge to the
    servicers.
        Where do we do our work? All over America. In America,
    there are 43,000 ZIP Codes, and last year we counseled people
    in 22,777 of them. That's part of the beauty of the hotline.
    Everybody with access to a telephone can access this service,
    and they can do it at their convenience, any time of the day or
    night.
        Where does our funding come from? This year is $62 million:
    $15 million comes from NFMC, NeighborWorks; $46 million from
    mortgage servicers, who are reimbursed by investors; $1 million
    from HUD; and $720,000 from Fannie Mae.
        The funding we receive from industry is significant,
    because it's flexible. The more we counsel, the more they pay.
    But more importantly, it's helpful to homeowners, because in
    the counseling process, we capture data from them which we
    transfer instantaneously to the servicer, to give them the
    jumpstart that they need to resolve the problem.
        Does the work that we do produce results? Every day I ask
    myself that question, and the answer is yes. And here's how we
    know.
        A member of our network, CCCS of Atlanta, studied 21,000
    people who received counseling in 2007. After 1 year, they
    looked at data from the credit reports, and they saw that, in
    fact, 71 percent of the people counseled were still in their
    homes and had avoided foreclosure. Copies of that research are
    on our Web site.
        So when we evaluate the effectiveness of the hotline, we
    asked the following:
        Did homeowners reach out for help? Yes. About 7,000 a day.
        Did they go through counseling? Yes. About 2,000 a day.
        Did their information get to servicers? Yes. 100 percent of
    the time.
        Did they avoid foreclosure? Yes. About 70 percent of the
    time.
        There are a couple of challenges that I would like to
    highlight for your attention today, and the first is that scams
    are proliferating.
        Every day, the first thing I do in the morning is Google
    foreclosure prevention, and every day there is a new scam that
    promises results for just a couple thousand dollars, and I know
    you're aware of that and are doing what you can.
        The second challenge is, there is so much talent and
    commitment in the housing counseling industry, much of it
    represented at this table, and yet the resources don't match
    the demand.
        Our desire at the Homeowner's HOPE Hotline is to give every
    consumer who calls the choice between face-to-face counseling
    and telephone counseling, and to make sure that there are
    adequate resources. The homeowners in America count on the
    counseling industry, and we are counting on you.
        Thank you.
        [The prepared statement of Ms. Hernandez can be found on
    page 69 of the appendix.]
        Chairwoman Waters. Thank you very much.
        Ms. Susan Keating.

     STATEMENT OF SUSAN C. KEATING, PRESIDENT AND CHIEF EXECUTIVE
       OFFICER, NATIONAL FOUNDATION FOR CREDIT COUNSELING (NFCC)

        Ms. Keating. Thank you, Madam Chairwoman.
        I am Susan Keating, the president and CEO of the National
    Foundation for Credit Counseling.
        And just by way of background, the NFCC is the Nation's
    oldest and largest network of community-based nonprofit
    financial counseling agencies.
        We have been in existence for almost 6 decades, and have
    106 member agencies that provide services in nearly 850
    communities across this country.
        As the largest HUD housing counseling intermediary, and as
    one of the largest recipients of funding under the National
    Foreclosure Mitigation Counseling Program, the NFCC is very
    proud of its ability to provide housing-related counseling, as
    well as a broad range of financial counseling and education
    services. Last year alone, NFCC member agencies provided
    services to over 3 million consumers.
        The NFCC commends Congress for recognizing the value of
    counseling in stemming the tide of foreclosures and for
    providing funding to make counseling available to those at risk
    of losing their homes.
        Has the NFMC Program made a difference? The answer is an
    unequivocal yes. While I could provide you with literally
    thousands of stories of the people the NFCC has assisted, let
    me give you two examples.
        A couple in Sumter, South Carolina, were both tragically
    diagnosed with cancer 7 months apart. Because of their medical
    expenses, they were 3 months delinquent on their mortgage and
    home equity loan. We helped them to get both loans modified
    with significantly reduced interest rates, resulting in a
    savings of $375 per month.
        A single parent in Thousand Oaks, California, went through
    a divorce and then lost her job. The ARM on her home reset, and
    she could not afford the new payments. In an effort to save her
    home, she turned to a ``workout company'' that charged fees,
    but provided no assistance. Then she came to us. We helped her
    structure a household budget, modified her mortgage, and her
    savings was $600 per month.
        Through the NFMC Program, Congress has made it possible for
    thousands of American families to not only keep their homes,
    but to begin the process of rebuilding their financial lives.
    However, there is lots more still to be done, and I would
    really like to focus on four specific areas.
        First of all, the mortgage crisis reflects a national
    failure to promote housing counseling. As a consequence, a
    significant number of homeowners bought homes they could not
    afford with mortgages they did not understand.
        The remedy is pre-purchase counseling for first-time home
    buyers, and also for those who are considering subprime or non-
    traditional mortgages.
        The creation of the Office of Housing Counseling within
    HUD, as passed by the House last week, represents a major step
    forward.
        Second, if we are to sustain housing-related counseling,
    there must be long-term funding for the NFMC Program and other
    counseling initiatives.
        Federal grants have helped finance the expansion of housing
    counseling, but without additional and dedicated Federal
    funding, nonprofit agencies will not be able to provide these
    vital services.
        Third, it is imperative that consumers have access to
    counseling services that meet their individual needs. The NFCC
    was critical of the Bush Administration's efforts to funnel all
    mortgage foreclosure prevention inquiries through a government-
    sanctioned hotline operated by a single intermediary, which in
    turn utilized the services of only 10 counseling agencies.
        Given the size and scope of the problem, it made no sense
    to limit the resources being used to address it when there were
    many other HUD-approved agencies that were ready and able to
    provide assistance.
        While there have been some improvements, it is unfortunate
    that the new Administration has not recognized this weakness
    and is following along the same path.
        When homeowners call the government-sanctioned hotline,
    they should be entitled to seek counseling services through a
    qualified entity that best represents their needs, whether that
    be the local NFCC member agency, a faith-based organization, or
    another community-based group. Consumers should have access to
    all available resources, and that has not happened.
        Fourth, today we are focused on fixing financial problems.
    Looking forward, we have to do more to prevent financial
    problems with broad-based financial education and literacy
    programs.
        The NFCC's recent financial literacy survey found that 41
    percent of Americans grade themselves a C, D, or F on personal
    financial knowledge. Only 42 percent keep track of their
    spending, and more than one-quarter say they do not pay their
    bills on time.
        Twenty-eight percent of mortgage holders admit that their
    mortgages have different terms than what they thought they had
    when they took out the loan. Is it any wonder why we had a
    financial meltdown?
        We believe there has to be a national strategy for
    financial literacy, and a national system of delivery. We must
    empower consumers to better understand the services and
    products that are being offered.
        Chairwoman Waters. Thank you so much.
        Ms. Keating. Thank you, and thank you for this opportunity.
        [The prepared statement of Ms. Keating can be found on page
    79 of the appendix.]
        Chairwoman Waters. Thank you.
        Ms. Hasegawa.

       STATEMENT OF LISA HASEGAWA, EXECUTIVE DIRECTOR, NATIONAL
      COALITION FOR ASIAN PACIFIC AMERICAN COMMUNITY DEVELOPMENT
                           (NATIONAL CAPACD)

        Ms. Hasegawa. Thank you, Chairwoman Waters, and members of
    the committee.
        And I just want to also thank Congressman Green, for your
    leadership with the Congressional APA Caucus' Housing Task
    Force. So I thank you.
        I am Lisa Hasegawa, and I'm the executive director of the
    National Coalition for Asian Pacific American Community
    Development. We're celebrating our 10-year anniversary this
    year.
        And I'm here today to really highlight what some of the
    structural issues have been in terms of access to NFMC funding
    for Asian American and Pacific Islanders serving community-
    based organizations.
        Unfortunately for Asian Americans and Pacific Islanders,
    historically, the system of housing counseling basically has
    been like NFMC--I'm sorry--the NeighborWorks affiliates and
    mainstream organizations, and there hasn't been--at this time,
    there are probably about five API-specific HUD-approved housing
    counseling organizations, and none of them receive funding from
    HUD.
        And so I think that there's a major gap in terms of the
    existing system for serving our communities in a linguistically
    and culturally competent manner.
        Now, we have been working, over the past several years,
    with NeighborWorks, with the Homeownership Preservation
    Foundation, etc., to build that capacity, but it has been a
    challenge.
        I think that what unintentionally has happened with the
    infusion of resources with the NFMC program has actually
    widened the capacity gap.
        It was--I think it made sense for the--for NeighborWorks
    America, when they were designing this program, to invest
    resources where there was existing capacity, but unfortunately
    for Asian Americans and Pacific Islanders, it infused resources
    into a system that didn't serve us to begin with.
        And so let me just go over a little bit about what we are
    doing to try to partner.
        Again, we are currently working with the National Council
    of La Raza, and several of our member organizations have been
    able to get NFMC contracts through partnering with the National
    Council of La Raza. So Seema Agnani, who was here earlier, with
    Chhaya CDC from New York, they are an organization that has
    language capacity in five different South Asian languages, and
    they're serving the Queens Community in New York and Jackson
    Heights.
        And they just recently did a study, for example, doing
    their own data and research, looking at the foreclosure
    listings, and doing a name count, and they came out with a
    study that basically said that over 50 percent of the
    foreclosures in a particular time period in certain ZIP Codes
    were with South Asian families, and they think that was a
    conservative estimate.
        We have been seeing those kinds of stories from our
    organizations, particularly those that are serving the Filipino
    community in California, the Korean community in Southern
    California, the Southeast Asian community in Central Valley in
    Minnesota, and the South Asian community, particularly in the
    Jackson Heights area.
        There's a recent Federal Reserve report that came out that
    validated that, where they looked at our population data, and
    overlaid that with a map of where Asian Americans and Pacific
    Islanders were living, and so there was a lot of correlation.
        Unfortunately, Home Mortgage Disclosure Act data does not
    disaggregate by Asian American and Pacific Islander sub-
    populations, so it has been very difficult to really show the
    challenges our communities have been facing. I have additional
    statistics in my written testimony that go further to show that
    need.
        There have been some positive steps forward. We have been
    working with Bank of America and Freddie Mac in particular to
    fund some of the work that we have been doing that hasn't fit
    within the prescripted eligible activities and grants
    requirements that is currently existing with NeighborWorks
    America's NFMC program.
        And so those flexible dollars have been really helpful for
    us to build the capacity of our organizations. We have gotten--
    NeighborWorks has given us scholarships to their trainings, to
    train more counselors who are bilingual and bicultural, but
    that kind of capacity building takes time.
        And so what we have been trying to do, for example, is to
    create systems and models where community-based organizations
    that have a lot of expertise and a lot of capacity, that have
    the language capabilities, that have the trust with the
    communities, they can play a role in this foreclosure crisis.
        They really want to play a role, but because only certified
    housing counseling and foreclosure counseling organizations
    were eligible for that funding, basically, they have been
    telling me that they are blocking the doors for some of the
    NFMC counseling organizations, because they are being asked to
    set up the--do the outreach, recruit people, provide the
    translation, provide the space, and all of that work, for no
    compensation whatsoever, because they are not eligible to
    receive NFMC funding. And so it's a real challenge for a
    community-based organization.
        So I encourage us to all think about ways in which we can
    compensate community-based organizations for the translation
    and interpretation services that they provide, and also for the
    case management that they provide.
        I think earlier we were talking about the differences
    between the face-to-face counseling versus the phone
    counseling, so a lot of folks will come and have many multiple
    issues, mental health issues, etc., that often can't be dealt
    with over the phone, and so you have this network of community-
    based groups who haven't been able to meet those needs with the
    current funding systems.
        So I appreciate the opportunity to testify, and the rest of
    my comments are in my written statement.
        Thank you.
        [The prepared statement of Ms. Hasegawa can be found on
    page 58 of the appendix.]
        Chairwoman Waters. Thank you very much.
        Mr. Cy Richardson.

        STATEMENT OF CY RICHARDSON, VICE PRESIDENT, HOUSING AND
              COMMUNITY DEVELOPMENT, NATIONAL URBAN LEAGUE

        Mr. Richardson. Chairwoman Waters, I am Cy Richardson, vice
    president for housing and community development at the National
    Urban League.
        And I very much thank you for the invitation to testify
    before the subcommittee today on the issue of foreclosure
    prevention, the role of housing counseling intermediaries, in
    this vitally important field of service delivery.
        Our views are based on decades of program-delivered
    experience, but many of the key findings are culled from
    lessons learned from the past 18 months through our
    participation as a grantee under the National Foreclosure
    Mitigation Counseling Program administered by NeighborWorks.
        The National Urban League has been a certified HUD housing
    counseling intermediary since 1997, and through the excellent
    work of our local affiliates, we provide various types of
    housing counseling and education services to individuals on a
    one-on-one basis, including the critically important heavy
    touch, face-to-face counseling under the NFMC program.
        I need to be clear that the Urban League believes that in-
    person, one-on-one, face-to-face counseling is the most
    effective form of foreclosure intervention and prevention for
    individuals in crisis.
        An internal census taken to gauge the service delivery
    characteristics of our affiliates in this area reveals that
    approximately 70 percent of our clients are African American,
    20 percent are white, and roughly 10 percent are Hispanic.
        And over the last three fiscal years, we have seen
    exponential growth in the number of homeowners coming to the
    Urban League in search of foreclosure counseling services
    across each of these racial categories.
        It must be stated, though, up front, that the National
    Urban League certainly appreciates NeighborWorks' dedication
    and diligence with regard to devising the NFMC program design,
    not to mention the sheer hard work it takes to manage the
    emergency funding for foreclosure prevention nationwide.
        However, for the purposes of this hearing, I would like to
    briefly describe the major issues and concerns we have found
    with NeighborWorks and their administration of the program,
    along with clear recommendations for problem resolution.
        First, the way the program is structured, by tying payment
    to goals by geography set at the onset of the year is highly
    burdensome and problematic, and ultimately, it creates an
    ineffective and rigid obstacle course that prevents effective
    draw funds for timely reimbursement of services rendered.
        This is a moving, breathing crisis that is changing every
    day, and in real terms, any goals projected are based on old
    and outdated information as soon as they are made, and are
    likely to be inaccurate. I hope we can revisit this today.
        Disaggregation of data is an important problem for us. We
    recommend a disaggregated approach to payment to intermediaries
    for their affiliates' work, and there are a number of ways this
    could be done, including payment to intermediaries, the full
    draw payments, when the overall threshold is met, or possibly
    increasing the number and pace of draws to the intermediary,
    possibly even on a monthly basis.
        With regard to variances and the locality service delivery
    that Mr. Wade talked about earlier, currently, variance
    thresholds are at 25 percent, and we must meet or exceed at
    least 75 percent of each established MSA goal or risk
    deductions from our counseling funds.
        We believe NeighborWorks should increase the MSA variance
    threshold to 50 percent, allowing more room for the real and
    unknown vagaries of client flow and keeping the funds flowing
    to our top performers. This will give our intermediaries more
    flexibility to reallocate goals as needed, and keep the
    payments flowing to those areas that are on pace.
        We're also recommending that NeighborWorks reduce and
    simplify the administrative requirements involved in reporting
    and management, as well as increasing the amount of program-
    related support funds that are allowed for the total counseling
    award, or otherwise helping supplement this funding for other
    resources. Our colleagues can speak about this issue a bit
    later.
        With regard to issues of client duplication, under the
    circumstances, we support the idea put forth by NeighborWorks
    of applying a set percentage threshold to all intermediaries on
    this issue, but we believe this percentage should be at least 5
    percent.
        The national average, according to NeighborWorks, from the
    database, is 5 percent, not the 3 percent, as they finally
    agreed and codified in recent weeks.
        Finally, in terms of much-needed marketing supports, we
    recommend that NeighborWorks allocate $2 million of the $6
    million recently awarded to them for a rescue scam awareness
    campaign, or some other agreed-upon amount that we can
    collectively agree upon, to facilitate expansion of the
    campaign and ensure greater reach into minority neighborhoods.
    I know my colleagues will speak on this, as well.
        We also believe that together we can make effective changes
    to the design and cooperation of this program that works for
    both Congress and for the agencies doing the actual work to
    stem the foreclosure crisis.
        We trust that you will give due consideration to these
    issues that we have laid out today, as they are obstacles to
    effective program delivery, and it's in all of our best
    interests to get this done.
        Thank you very much.
        [The prepared statement of Mr. Richardson can be found on
    page 85 of the appendix.]
        Chairwoman Waters. Thank you.
        Our last witness will be Janis Bowdler.

    STATEMENT OF JANIS BOWDLER, ASSOCIATE DIRECTOR, WEALTH-BUILDING
           POLICY PROJECT, NATIONAL COUNCIL OF LA RAZA (NCLR)

        Ms. Bowdler. Good afternoon. I am Janis Bowdler, the
    associate director of the Wealth-Building Policy Project at
    NCLR. Thank you so much for inviting me. All of you have been
    really great champions of the Housing Counseling Program, and
    that is clear to us. We thank you for your support.
        Latino communities are watching a generation of wealth slip
    through their fingers, and nonprofit housing counseling
    agencies are really on the front lines of this battle, yet
    support for their work has not kept up with demand.
        Congress must strengthen the counseling infrastructure, and
    doing so will ensure that services are widely available to
    combat foreclosure, and in the future, help homeowners avoid
    common lending traps.
        In my testimony today, I'm going to talk a little bit about
    NCLR's approach to housing counseling, and then I'm also going
    to talk about some of the challenges to implementing the NFMC
    program.
        As you have heard from all of my colleagues already, NCLR
    is one of a couple dozen housing counseling intermediaries. Not
    many people have talked about the role of intermediaries, but
    that's important, as well.
        Intermediaries provide quality control, training,
    partnerships, develop technology, do a lot of work to advance
    the housing counseling field in general, and NCLR is the only
    network that focuses specifically on the Latino community.
        Over the last decade, NCLR has used one-on-one counseling
    to help thousands of families secure their first home. As my
    colleague Cy stated, this is the most effective way to reach
    our communities. There are several studies that show that this
    is a proven methodology, especially for communities of color.
        When the foreclosure crisis hit, we applied the same
    approach to foreclosure prevention counseling. In the last 12
    months, we counseled over 750,000 delinquent homeowners--I'm
    sorry--7,500--I added a couple of zeroes there, my mistake--in
    the last 12 months, which is a 250 percent increase over our
    previous year.
        But this approach is not without its costs. On average, it
    takes our counselors 15 hours to help a family through the
    process. We focus on in-depth counseling, because we need to
    help homeowners understand their options, find the best
    possible resolution, and get connected to other resources.
        We don't focus on phone counseling or provide referrals.
    Instead, we keep our clients in-house, and we work with them
    all the way to the solution.
        The demand for foreclosure prevention is on the rise, but
    we're concerned that demand is outpacing capacity, and without
    a robust system in place, families are going to get lost with
    the foreclosure scam artists, which brings me to the NFMC
    program established last year.
        The funding was appropriated to NeighborWorks America for
    quick turnaround to counseling agencies. They did successfully
    turn the money around quickly, which is not to be
    underestimated.
        They are one of our partner intermediaries. We have sat
    with them, worked on the industry standards that Mr. Wade
    testified about earlier, and we have often worked together on
    public policy issues.
        But it's important for us to bring up the challenges in
    implementing this program, because it's having a crippling
    effect on the nonprofits out there trying to meet the needs of
    their community.
        Several of the challenges have already been covered, and
    there's more detail in my testimony, so instead of the five
    that we have outlined in the full testimony, I want to focus on
    two.
        And that is that the reporting requirements have been
    extremely burdensome. We already had a reporting system in
    place for HUD that had been working for decades, but when this
    program came in place, we had some over 40 additional data
    fields that we had to complete. Technology did not keep up with
    that. So we all work from one of two or three technology
    platforms.
        Every time they make a change to the system, we have to
    wait for the technology to be updated, which means that we're
    all busy doing work, but the technology is not capturing the
    data. That creates a lag, and homeowners fall through the
    cracks. We don't get reimbursed.
        As an example, in our first quarter of reporting, NCLR
    reported to HUD 2,000 families. We could only report to
    NeighborWorks 465 families.
        Our increased cost to administer the program, you heard
    that we can only capture a small amount of that, our cost
    increased by 40 percent to administer these programs, based on
    TA that we had to provide to our network and expanding
    technology, etc.
        The other is this issue on how the fee structure actually
    incentivizes Level 1 counseling over the more in-depth
    counseling. So let me talk a little bit about this, because
    it's very important.
        You get paid, what is it, $100, $150 for that Level 1. It
    takes about 20 minutes to an hour. You can spend all day, over
    and over, doing intake and referral, and earn as many $150 fees
    as you have 20 minutes in a day.
        But it takes up to 15 hours over the course of 3 to 6
    months, with all the challenges working with the servicers, to
    get reimbursed for that last $250.
        Now, there are other challenges that I can go into more in
    the Q&A, but in this way, it makes more sense, and it
    incentivizes that initial intake and referral to get the quick
    buck, rather than take the time to do the most effective
    counseling, which is the one-on-one, and which takes a lot
    longer, and only pays out a little bit more money.
        So that's why we think we see these really high numbers in
    Level 1, because the incentive is not there. You don't get paid
    until all the way out at that 6th month, when you have been
    putting time and incurring staff expenses, until you see that
    resolution. That is a huge problem.
        So I'm running out of my time, I'm going to stop there. But
    the rest is in my written statement.
        [The prepared statement of Ms. Bowdler can be found on page
    48 of the appendix.]
        Chairwoman Waters. Thank you all very much.
        I will now recognize myself for 5 minutes.
        Let me first start with Ms. Hernandez.
        Could you quickly explain to me how you're connected to the
    HOPE NOW Hotline in a different way than other counselors are?
    You said something about that.
        Ms. Hernandez. Yes, I certainly can.
        First of all, there is no HOPE NOW Hotline. There is only
    the Homeowner's HOPE Hotline. And the way we are connected to
    the HOPE NOW Alliance is that we are a partner with them, and
    they use their considerable industry outreach capacity to send
    borrowers to the hotline, in hopes that we will capture the
    data that they need to give a jumpstart to the resolution.
        Chairwoman Waters. Okay. I'm sorry. Is that any different
    from any of the other counseling agencies?
        Ms. Hernandez. Yes, I think it is. I think we got
    preferential treatment in the HOPE NOW Alliance when Secretary
    Hank Paulson formed the HOPE NOW Alliance in October of 2007,
    and in order for people to be admitted to it, the threshold
    criteria was they would agree to fund counseling at the
    Homeowner's HOPE Hotline.
        So we're a partner with HOPE NOW, and we receive funding,
    $150 per case, per completed case, from the servicers, so in
    your earlier questions about the funding stream, ours is pretty
    clean.
        A homeowner comes in, and they tell us who their servicer
    is. We do a 60-minute counseling session with them. We transmit
    the data to the servicer, and at the end of the month, we bill
    the servicer.
        And there are--80 percent of the people who call us have
    loans owned by members of the HOPE NOW Alliance. The other 20
    percent call us--
        Chairwoman Waters. Do you also bill NeighborWorks?
        Ms. Hernandez. We bill NeighborWorks. Right.
        Chairwoman Waters. And how do you get paid for that? I
    mean, the service that you just described, that you get $150
    from the servicers for? How do you calculate or value?
        Ms. Hernandez. Oh. It costs, our service costs $150. So
    between our overhead and the triage call center, the call
    center workers who do the intake, and the counselors, the 9
    counseling agencies, the cost is $150 altogether. So we collect
    $150 from the servicer. We retain, from the servicer payment,
    $30 of that for our overhead in triage--
        Chairwoman Waters. No, no, no, no. My question is, how much
    do you collect from NeighborWorks?
        Ms. Hernandez. And then, yes, so we collect $150 per
    session from NeighborWorks.
        Chairwoman Waters. So you're getting $150 from the servicer
    and $150 from NeighborWorks?
        Ms. Hernandez. No. Every session is only funded by either a
    servicer or NeighborWorks.
        Chairwoman Waters. Oh.
        Ms. Hernandez. There's never--
        Chairwoman Waters. Is that right?
        Ms. Hernandez. Right.
        Chairwoman Waters. Okay.
        Ms. Hernandez. So we use the NeighborWorks money to fund
    the counseling for borrowers who don't belong to the HOPE NOW
    Alliance servicer ranks.
        Chairwoman Waters. So do you do face-to-face counseling,
    also?
        Ms. Hernandez. We don't. We only do telephone counseling.
        Chairwoman Waters. How large is your organization? I mean,
    where are you located, and do you have chapters, or offices in
    places other than one city or one State?
        Ms. Hernandez. Yes. We are a 501C-3. Our headquarters is in
    Minneapolis. We contract with nine large HUD-approved nonprofit
    counseling agencies all over the country. And they are, I
    think, in about 23 cities. So they are on contract with us.
    They are vendors for this service.
        Chairwoman Waters. How do they--
        Ms. Hernandez. We have 10 people on our core staff and 6
    members on our board.
        Chairwoman Waters. Okay. How do your--those that you
    contract with, how do they get paid, and do they get paid $150,
    also?
        Ms. Hernandez. They get paid--we retain $30 of the servicer
    money. They get paid $120. So we develop an annual contract
    with them, and they have performance goals, and they have
    standards of excellence that they must meet, and we have
    quality control audits--
        Chairwoman Waters. So that get $120 whether or not they're
    doing what would be considered Level 1 or Level 2 or Level 3,
    it doesn't matter?
        Ms. Hernandez. It's all Level 1.
        Chairwoman Waters. All Level 1?
        Ms. Hernandez. Yes.
        Chairwoman Waters. So this $150 for you, $120 for those you
    contract with, simply is for answering the phone and taking a
    name and telephone number, and referring them someplace else?
        Ms. Hernandez. No. No. The $150 that we collect from either
    servicers or NeighborWorks is for a comprehensive counseling
    session. That's the only way we reimburse, is for a
    comprehensive counseling session--
        Chairwoman Waters. What does that mean? Does that mean
    you--
        Ms. Hernandez. That means that the--
        Chairwoman Waters. --you follow through to loan
    modifications?
        Ms. Hernandez. We follow through with the servicer to send
    the data. If there is a foreclosure date pending, we're on the
    phone with the servicer. If the homeowner chooses, they can
    contact their counselor back and say, ``They have offered me
    this mod or this repayment, do you think it's a good deal?''
        Chairwoman Waters. Okay. Let me just say this. I have done
    implementation of loan modifications from my office, and what
    happens is, when I contact the servicer, any number of things
    can happen.
        One is, they could they inexperienced. They give me a
    waiver, my constituent, to talk to the servicer.
        If that servicer has not taken into consideration, for
    example, that Social Security is income that has not been
    calculated into the consideration, and I bring that up and I
    say, ``And maybe you should consider this and that and the
    other,'' and they have been talking with them already, and then
    they say, ``Okay, all right, we'll take another look at this,''
    and I follow it, follow it, follow it, until either I get a
    loan modification or not.
        Is that what you're doing?
        Ms. Hernandez. No.
        Chairwoman Waters. Okay. All right.
        Ms. Hernandez. Can I just compliment you on--
        Chairwoman Waters. No, no, no. I'm going to go on to--well,
    my time is up, so I'm going to go to Mr. Cleaver, and then
    perhaps we'll have another round. Thank you.
        Mr. Cleaver?
        Mr. Cleaver. Thank you, Madam Chairwoman.
        Let me welcome Colleen Hernandez from the Fifth
    Congressional District, who was pretty much the housing czar
    with the Kansas City Neighborhood Alliance for years in Kansas
    City, and I wanted to welcome her here.
        I want to go to Mr. Richardson, first of all.
        I don't know if you were here when Mr. Wade was giving
    testimony. I asked him the question about the face-to-face
    versus telephone.
        I mean, it's not a trick question. I don't know. But you
    seem to be a bit more emphatic that face-to-face was far more
    workable than--Mr. Wade suggested that there needed to be
    research, empirical data.
        Mr. Richardson. No. I would take issue with that statement,
    for two reasons.
        One, there is quantitative data to suggest that one-on-one,
    face-to-face customized counseling generates the best and
    better outcomes for clients.
        And two, for organizations like ours that are interested in
    stabilizing households, you have to develop relationships that
    cannot be generated telephonically.
        They can only be understood, diagnosed, and possibly solved
    through many hours, as my colleague Janis said, of in-depth
    conversation and relationship building with the client, so
    there's no controversy around that, as far as we're concerned.
        Mr. Cleaver. Are you sure?
        Mr. Richardson. Yes, sir.
        Mr. Cleaver. I'm--that's a rhetorical question.
        Ms. Hasegawa. Second. Third.
        Mr. Cleaver. Oh, okay. Well, yes. Then--
        Mr. Richardson. Mr. Cleaver, if I can just add, treating
    clients as commodities in this crisis is wrong.
        Mr. Cleaver. Well, then, if you're right, if you're
    correct, and I don't have any reason to question the
    authenticity of what you and Ms. Bowdler have stated, then
    don't you think we can maybe make some adjustments?
        Mr. Richardson. Absolutely. I think we need to address some
    of the key points that we have made in terms of program design
    amendments.
        NeighborWorks needs to understand that most groups that are
    serving a predominantly minority constituency are dealing with
    the hardest to serve cases. These cannot be solved over the
    phone. These can be solved only by rolling one's sleeves up and
    asking the core, key questions that will get to the root cause.
        In many cases, as it was identified in the New York Times
    today, it's our folks who are in these bad products. You cannot
    get them out of these bad products in 20 minutes on the
    telephone. It takes time, effort, and we do--80 percent of our
    work is Level 3, that face-to-face counseling that should end
    in a resolution.
        Only about a quarter of our work is Level 1, and we prefer
    to see it through until we get folks to Level 3.
        Mr. Cleaver. I'm assuming ditto, ditto?
        Ms. Hasegawa. I'll just say one thing about the phone
    counseling. I think that there are situations where, for our
    communities, you know, some of our counseling organizations,
    like that speak Thai, for example, they're getting calls from
    across the country, because they don't have those, you know,
    services that are available and accessible in the language.
        So that's why we are working to provide some telephonic
    interpretation services, but I still think that the preference
    would be for the face-to-face in terms of the long-term
    wellbeing of the families.
        Mr. Cleaver. We need the face-to-face. That would be the
    predominant of dealing with the crisis. But we would also need
    to have telephonic--
        Ms. Hasegawa. Supplement, as a supplement, absolutely.
        Mr. Cleaver. Yes, okay.
        Yes, Ms. Keating?
        Ms. Keating. Congressman Cleaver, the NFCC's position is it
    ought to be about client choice. Services ought to be delivered
    in any way that is going to get us to a solution and help
    stabilize that family.
        Mr. Cleaver. Yes, I am for that. I don't think you're going
    to find anybody in here who--well, let me just speak for
    myself. I agree with you. And that is why I have been raising
    the question, trying to find out what works, because I think
    whatever it is that works is what people will move toward.
        And so I want to come back--Ms. Hernandez, is the best
    technology being utilized presently?
        Ms. Hernandez. No, it's not.
        And if I could comment on something that was just said a
    few minutes ago, we do not envision this as a battle between
    telephone counseling and face-to-face counseling. I agree 100
    percent with what Susan Keating just said, that the consumer
    should have a choice in how they want this service delivered.
        In the first week in February, we convened a meeting where
    we said to every intermediary that we could talk to, ``Can we
    send calls straight to you from our triage call center?''; and
    in response to that, we have added 600 new agencies, so that we
    say to the consumer, ``Do you want this in person or do you
    want it on the phone?''
        Ten percent want it in person, and 90 percent want it on
    the phone. Why do they want it on the phone? Mainly because
    it's free and it's convenient, and partly because there's a
    measure of anonymity. They're a little bit embarrassed, and
    they like the fact that they can get the help that they need.
        So I would take issue with the fact that this is
    commoditizing a client, that in fact, ours is a full,
    comprehensive real counseling service that takes it through
    resolution if the homeowner decides to engage us at that level.
        But in response to your question, and I'm delighted to have
    that question, is technology being used to the fullest, we all
    know that servicers are at capacity, that it takes too long to
    get to resolution, and one of our affiliates, the Consumer
    Credit Counseling Services of Atlanta, has piloted a
    technological solution with Wells Fargo, and now with Bank of
    America, called Early Resolution Counseling Portal, and they
    are having, to your point, they are having tremendous results
    in expediting with every single person who calls.
        What happens is, when a telephone counselor, somebody calls
    in and they listen to the story on the phone, they can get on
    their computer screen what the loan facts are, how delinquent
    are they, who is their servicer. But the most important thing
    they get is, what are the investor work rules.
        So when they propose a solution to the servicer, that has
    already been vetted through the investor work rules. That's one
    of the biggest impediments that slows things down.
        This technology has been piloted for the last 16 months in
    Atlanta with Wells Fargo. We believe that industry should
    migrate to that and migrate quickly. We think it would greatly
    expedite--
        Mr. Cleaver. Why isn't it happening?
        Ms. Hernandez. I think that's a good question for the
    committee to ask the servicing industry. I don't know why it
    isn't happening. We're certainly doing everything we can to
    promote it.
        Mr. Cleaver. Ms. Bowdler?
        Ms. Bowdler. A follow-up on something. Coming back to the
    issue of telephone counseling versus in-person counseling, I
    don't doubt that folks who come through the hotline, that a
    certain percentage of them in fact prefer phone counseling, but
    I think what's important for the communities that we serve, the
    communities of color, they have been hardest hit. They have the
    most complicated of situations. They were the targets of
    predatory lending. They are in the communities where they're
    seeing their home values go down.
        It's infinitely more complicated to deal with that, which
    doesn't lend itself well to the phone issue.
        On the technology issue, excellent points on the need for
    better technology to relate to the servicers, but we're still
    also struggling for technology to relate with one another.
        So a constant problem is, on the one hand, we want to be
    able to partner with the hotline and get those referrals, but
    oftentimes, we get referrals without information, which means
    we have to start from scratch, but because the hotline has
    already inputted that data, as Mr. Wade was describing earlier,
    they get credit for that Level 1, which means our initial $150
    is already spent. We have $200 left to collect. And we have to
    work for the next 6 months in a dysfunctional system to try to
    collect it.
        Mr. Cleaver. Thank you, Madam Chairwoman.
        Chairwoman Waters. Thank you very much.
        Mr. Green.
        Mr. Green. Thank you, Madam Chairwoman.
        And I would like to, Madam Chairwoman, recognize Ms.
    Hasegawa, Lisa, for her outstanding work. She has been working
    on these issues for some time now, and a lot of what she does
    is done without any degree of compensation other than just
    knowing that you have done a good deed, and my suspicion is
    that applies to all of you.
        Let me ask, if you would, Lisa, could you kindly give us
    some examples of why we might need to be sensitive to culture,
    some reasons why culture, having persons who can relate to
    cultures is important?
        Ms. Hasegawa. Sure, absolutely.
        I think that I'll use an Asian American example and a
    Native American Hawaiian example.
        With Native Hawaiian communities, we are working with the
    Council for Native Hawaiian Advancement and the Hawaiian
    Community Assets.
        Even though language is not an issue in that situation,
    culture and understanding of how some of the loans are
    structured on Native Hawaiian homelands, and sort of the
    communication style, even in English, right, with Native
    Hawaiians, and that trust is extremely important, because there
    is a mistrust of existing government systems, right, and
    programs, that have for years and years discriminated against
    Native Hawaiian communities.
        And so I think that is the approach, the trust and the
    relationships that the Native Hawaiian community-based
    organizations have, has been critical to their success, and
    this is where language is not an issue.
        And then similarly, I think that because of the linguistic
    isolation of many of the communities, there are a lot of
    referrals to friend or family, etc., and so it creates this
    environment where they don't have access to accurate
    information about what options are available, and so because of
    that, we have heard, for example, of some scams that were going
    on in the Lao community in Minnesota.
        They were offering, you know, to do a refi. So they were in
    actually really good loans, and then, like 7 percent, and then
    they got into 14 percent loans for a cashout refi, and the
    whole scam basically was saying that you would get two tickets
    to go home to Laos, right.
        And so these are things that prey upon, you know, people's
    lifelong dreams to go home, right, and to take their families
    with them, and so some people took that, thinking that their,
    you know, price for their home was going to go up, etc., and
    then they found themselves in a really bad situation.
        So there are things like that that are happening, that are
    very, you know--and I talked to some community leaders in
    Minnesota, and they said, ``Oh, we thought that the foreclosure
    crisis was only going on in Minneapolis,'' you know, with the
    Lao community, because there's just that lack of information in
    those communities, except for the scams that are being taken
    advantage of with ethnic media.
        The people who are at the scam are really good at doing
    outreach and using ethnic media, and so if they can do it, we
    should be able to do it.
        Mr. Green. And with reference to intermediaries, is it true
    that--I think this has been addressed--we have no AAPI
    intermediaries?
        Ms. Hasegawa. That is correct. We have been building--one
    of the criteria to become a national HUD housing counseling
    intermediary is, you have to have a nine-State network.
        And so we have been working very hard to make sure that we
    have HUD-approved counseling agencies that are also funded and
    have the capacity to be able to have that nine-State network.
    Then we would have to apply to become a HUD housing counseling
    intermediary, and then that would just be the eligibility, and
    then we would have to then apply to get funding from HUD, and
    then to able to partner.
        So it is a process that we have had to go through, and we
    have talked to HUD about the possibility, and they are awaiting
    our application.
        Mr. Green. Well, I would like to offer assistance with this
    process, and if you need the assistance, please contact the
    congressional office so that we can be of assistance to you.
        Ms. Hasegawa. Thank you, Congressman.
        Mr. Green. And I'm concerned about this, because in my
    congressional district--
        Ms. Hasegawa. That's right.
        Mr. Green. --we have the ballot printed in three languages.
        Ms. Hasegawa. Yes.
        Mr. Green. The ballot is in English, Spanish, and
    Vietnamese--
        Ms. Hasegawa. Yes.
        Mr. Green. --soon to be in Chinese, and if we can diversify
    with a ballot to this extent, surely we can diversity with the
    intermediaries and make sure that all communities are receiving
    the kind of assistance that's available and that's necessary.
        Ms. Hasegawa. Absolutely.
        I'll just bring up one comment that I have in my testimony,
    and that's Title 6, and obligations of NeighborWorks America,
    Freddie Mac and Fannie Mae, and HUD in particular, with the
    Making Home Affordable Program.
        One of the qualifications, eligibility requirements to have
    access to some of these products is that you have to have
    housing counseling, go through a housing counseling session,
    and that's all well and good if you speak English, or if, you
    know, you happen to live in a city where there is a bilingual
    HUD-certified housing counseling organization or counselor.
        And so that we are very concerned about the disparate
    impact and access that our communities are going to and other
    limited English-proficient communities are going to have to
    those products, given the problems with the system that
    currently exists.
        So Title 6 is the discrimination based on race and national
    origin, and discrimination based on language spoken is one of
    those forms of discrimination.
        NeighborWorks has consistently told us that they don't feel
    that they are obligated to Title 6 because they get a direct
    appropriation from Congress and that it's not a Federal grant.
        So we have been going back and forth with them on that, and
    I think that one of my recommendations was to get clarification
    on that issue, and also now that Freddie Mac and Fannie Mae are
    also regulated by HUD in a new way, I would ask to reconsider
    whether they also may be obligated.
        But it is the case that financial services organizations
    are not obligated, and so that has been a challenge.
        And I would also say that any recipient of HUD funding is
    obligated to Title 6.
        And so there's the obligation and then there's also the
    enforcement of the obligation--
        Mr. Green. My time is up, but I'm going to ask you, if you
    would, to contact our office so that we can further these
    discussions.
        Ms. Hasegawa. Absolutely.
        Mr. Green. Thank you.
        Thank you, Madam Chairwoman.
        Chairwoman Waters. Thank you very much.
        Ms. Capito.
        Mrs. Capito. Thank you.
        I would just like to go down the row. I want to ask--I'll
    ask three questions, and they should be fairly short.
        How many people have you served with your--through the
    counseling, housing counseling; how much money has your
    organization received; and have you received any of the money
    for the legal counsel, or the legal assistance?
        Ms. Hernandez?
        Ms. Hernandez. In the last 16 months, we have served
    486,000 people with the Homeowner's HOPE Hotline counseling.
    The Federal grant that we have--our annual budget is $62
    million; $15 million of that is from Federal sources, from
    NeighborWorks NFMC. And your third question on legal, we have
    received no legal funding.
        Mrs. Capito. Okay. Thank you.
        Ms. Keating?
        Ms. Keating. Do you want me to answer that question?
        Mrs. Capito. Sure.
        Ms. Keating. Actually, through the NFMCP, our intermediary
    agencies have conducted just under 70,000 actual sessions, and
    we have received the highest level award available in Round 1,
    which was the $15 million in NeighborWorks funding.
        Mrs. Capito. And did you get any of the legal?
        Ms. Keating. Yes, we did, $1.7 million.
        Mrs. Capito. Have you spent that?
        Ms. Keating. No, we have not. We are in the process now of
    executing against that.
        Mrs. Capito. Let me ask you, as a clarification question,
    you receive your funding from NeighborWorks and then you fund
    down to a sub-grantee, correct?
        Ms. Keating. Yes, we do.
        Mrs. Capito. And then what is your administrative fee on
    that?
        Ms. Keating. It is 4 percent. There were also program
    dollars available in Round 1. We distributed most of the
    program dollars out to agencies so that they could actually
    build capacity and basically address the needs of their
    communities.
        Mrs. Capito. Okay. Thank you.
        Ms. Hasegawa. We currently don't get any money directly
    from NFMC for the reasons I stated earlier. We do have a
    contract with the Homeownership Preservation Foundation for
    translation for their hotline, that we're currently working on
    the technological systems issues, to try to figure out.
        We had a $15,000 grant, which I do not think was NFMC
    funding, to do outreach planning, and that was from
    NeighborWorks, but we currently don't get any funding. Some of
    our member organizations do get funding through the National
    Council of La Raza as sub-grantees.
        In terms of the numbers of people, it would be included in
    Janis' numbers, and we don't--we're not collecting that data,
    because we're not the intermediary, and we don't get any legal
    money, either.
        Mrs. Capito. Okay. Thank you.
        Mr. Richardson. In Round 1, we served approximately 4,600
    clients and our appropriation was about $1.2 million, in Round
    1, NFMC, and we did not go in for any of the legal assistance
    funds.
        Mrs. Capito. Thank you.
        Ms. Bowdler. Also for Round 1, we got $2 million. We served
    7,500 families--this time I got my number right--and we
    received no legal assistance, money for legal assistance. And
    we include six national capacities groups.
        Mrs. Capito. Your funding comes down through NeighborWorks,
    then, right?
        Ms. Bowdler. That was just the money we got through the
    NFMC program, yes, through NeighborWorks.
        Mrs. Capito. Okay. That's really all I wanted to know, just
    for informational purposes. Thank you.
        Chairwoman Waters. Thank you very much.
        I would like to also give this panel a second round, since
    we have so few members here, and I will first yield myself
    another 5 minutes.
        I would like to go back to the Homeownership Preservation
    Foundation, and let me just say this, that you do have a lot of
    support, all of you, all of the counseling agencies in and the
    Congress of the United States. We're anxious to have families
    have counseling assistance and services.
        We're really focused on the foreclosure problem that we
    have, and we really want these counseling services to be very,
    very strong in helping to get loan modifications.
        So I am trying to figure out how to do that. The numbers
    are rising, and we don't seem to be making much of a dent that
    we can see.
        And one of the things I'm going to have to do is find out
    how you calculate, how do you get your numbers, because there
    is some confusion here.
        Let me first understand, Homeownership Preservation
    Foundation, you get your referrals through the HOPE line; is
    that right?
        Ms. Hernandez. We own and operate the Homeowner's HOPE
    Hotline.
        Chairwoman Waters. Okay. And then do you refer them to
    these other counseling agencies, or do you do what is necessary
    to connect those callers with the servicer? What do you do?
        Ms. Hernandez. We do all three of those things, and we are
    very focused on doing what the consumer asks to be done. So--
        Chairwoman Waters. Do you follow up when you do--a consumer
    calls you, and you connect them or put them in touch with the
    servicer; do you follow up to see if there was a loan
    modification, or you simply turn it over to the servicer?
        Ms. Hernandez. We leave it to the--at the end of a 60-
    minute counseling session, the counselor says, ``Here's my
    name, here's my direct number. I'm sending your file to the
    servicer. And if you don't hear back from them in 5 to 10
    business days, call me back and let's follow up.'' That's one
    kind of case.
        Another kind of case is if there is a foreclosure date
    pending, the counselor gets the servicer on the phone and they
    work towards a resolution.
        The third kind of case is the one through ERCP, where they
    have live connection between the counselor and the servicer,
    both focused on the solution, while the homeowner is on the
    line. That, frankly, is our preference, because it expedites
    resolution.
        Chairwoman Waters. Now, all of those you consider in the
    Group 1 category where you get paid $150 for each of those
    kinds of services?
        Ms. Hernandez. Yes.
        Chairwoman Waters. Okay. And how many referrals do you make
    to other counseling agencies?
        Ms. Hernandez. Not as many as we would like. When the
    homeowner calls the hotline, 30 percent of the time, they don't
    want to talk to a counselor, they just have a question, they
    just have a simple question like, ``Is your service in Spanish,
    are you open on Sunday, how do I reach my servicer,'' etc.
        The other 70 percent want to talk to a counselor, and at
    that point, the call center worker says, ``Do you want this
    service in person, in your community, or do you want it on the
    telephone now?''
        And the person--if they want it in person, in their
    community, then we have a locator database that we have
    requested the intermediaries join, and if somebody says, ``I
    want it in person,'' we find in our locator database the three
    counseling agencies nearest to them, and we give them the
    contact information. That's the end of it. We don't bill
    anybody for that.
        Then, when they call the intermediary, they call the agency
    that we referred them to, that agency can bill NFMC for a Level
    3 $450 session if, in fact, that's what they conduct. So--
        Chairwoman Waters. So if a citizen calls you and you refer
    them to the servicer, you get information, you connect with
    their servicer, and they call another agency, is that
    considered a duplication?
        Ms. Hernandez. If we counsel them--yes, if we counsel them
    through Level 1, and at the end of that, we connect them to a
    servicer, and we file first, then--and somebody else files
    later, then that would be considered a duplication.
        Chairwoman Waters. So if that person that you refer them
    to, if that person--if the person you referred says, ``Well,
    the servicer was supposed to call me back, I never heard from
    him, so I called back, and I was referred to this other place,
    and I called this other counseling agency, and guess what they
    did? They not only got the servicer, but they got me a loan
    modification.'' Is that a duplication?
        Ms. Bowdler. The way I understand how it works is, if
    through the hotline they receive that initial intake, they
    bill, they get $150.
        If they were to come see an NCLR group, even if we had to
    start from scratch, we can still only bill for Level 2 and 3,
    which is $200.
        So if they were to have come to me first, I could bill for
    the whole thing, but because they went there first, I can still
    bill for that $200, but I can't get the initial payment. That
    would be considered a duplication.
        And then as I stated, the impact is that we end up doing
    work that takes months, and we only--not only do we only get
    paid $200 for it, but--
        Chairwoman Waters. How many--rather than how many, how many
    of you feel that you're getting--you're servicing in what would
    be described as a duplicative way, clients who have talked to
    someone else first, and didn't get satisfaction, or maybe they
    were connected to a servicer who didn't follow up, and you're
    doing the second and third level work; how many of you find
    yourselves in that position?
        Ms. Keating. Chairwoman, if I--
        Chairwoman Waters. Yes.
        Ms. Keating. --may, we do see examples of that.
        I think one of the issues, and you have been touching on
    this throughout the hearing, is on how the government-sponsored
    hotline was initially set up, it was very focused through one
    intermediary.
        Those agencies were only providing Level 1 services, and
    that created this artificial notion of what is Level 1 or Level
    2, rather than starting with the homeowner, and--whether it is
    face-to-face, by phone, or whatever--getting at the root cause
    and working towards solutions.
        So I would just say, even though there have been some
    recent changes with the hotline, where a second question is
    being asked, there is spillover. If this is going to be the
    government-sanctioned hotline, we have to figure out how to use
    the full capacity of all the HUD intermediaries and all those
    agencies, whether it be by phone, face-to-face, whatever, and
    provide all the resources to deal with this problem right now.
    Even with all of our resources together, we cannot fix what has
    happened in America here.
        Chairwoman Waters. Let me just ask, do you any of you
    believe that every housing counseling agency should train and
    develop people to really help implement loan modifications, and
    from intake to finish, you should be responsible for it?
        Ms. Keating. I would say it really depends on the client
    and what the situation is.
        Congresswoman, I would say that's really going to vary.
    It's also going to vary depending upon the type of the loan and
    so forth.
        So I would just say I think we need very well-trained
    counselors. For instance, at the NFCC, all counselors are
    certified. They go through extensive housing certification and
    so forth, to provide these services.
        Can they actually be negotiating all the loans, given the
    complexity, and the creative that are out there? They can
    probably take it to a point.
        What they have to be able to do is reach the servicer and
    be able to talk and be the advocate for the consumer, and have
    all the facts, and have taken the time to get all the facts and
    information, so that they can be that advocate, and work
    through, again, to get a modification taken care of.
        Chairwoman Waters. Thank you very much.
        Mr. Green.
        Mr. Green. Yes. I would like to follow up on what the Chair
    is bringing to our attention, because it seems to me that we're
    encouraging, as has been said, the intake process, which is 20
    minutes, and then we find some other entities having to go
    through this 20-week process, which will net a lot less, I hate
    to say cash, but money, and a lot of the people are working,
    trying to make a living, who are performing the services.
        So why would we not want the intake person or entity to
    take this to fruition, as opposed to passing on the hard work
    to someone else? That was the question. And I would like to
    just hear another answer to that question.
        Why is it that we won't pursue it with one entity, so that
    we don't find this incentive to take the 20-minute way out, as
    opposed to the 20-week way out?
        Ms. Hernandez. Could I respond?
        Mr. Green. Please.
        Ms. Hernandez. First of all, the work that we do is not 20-
    minute work. Our average counseling session is 60 minutes, and
    that's at the consumer's choice. We can complete that process
    in 60 minutes.
        We, as I mentioned, when Congressman Cleaver was asking,
    what works, we're very focused on what keeps the homeowner in
    the home and helps them avoid foreclosure. Seventy percent of
    the time, our people stay in the home a year later, and avoid
    foreclosure. So we are completely committed to resolution in
    our model set.
        And so there is an intake function that is our call center,
    but what is not being clear here is that, from the call center,
    we transfer people, we--if the consumer wants to talk to a
    face-to-face counselor, and that's their choice, then we
    transfer them immediately. We don't bill anybody for that.
    We're not competing with that.
        We're saying to the consumer, ``What do you want?'' And if
    they want face-to-face--10 percent of the time they do--then we
    connect them, if there is somebody in their community who
    offers that service.
        Mr. Green. Ms. Hernandez, permit me to ask, and this is
    only for edification purposes, if you take 60 minutes, let's
    make it 60 minutes, but when you're finished, you receive about
    $150 for the Level 1, right?
        Ms. Hernandez. Yes.
        Mr. Green. Now, assuming that the problem is not arrested
    at this point, the Level 2 is where there may be many more
    minutes than 60, many more hours.
        And the concern that I'm raising is, if we don't do
    something with the 60-minute process that sort of connects the
    60-minute person with the longevity, what we have done is,
    we're passing the toughest part of this battle to people who
    are going to receive a lot less in terms of an emolument.
        Now, if I'm incorrect, I would like to have someone to help
    me. Would you like to jump in, Mr. Richardson?
        Mr. Richardson. Yes. I would like to--
        Mr. Green. Please.
        Mr. Richardson. --as a coda to that point, I'll say this.
    We gladly take on that work, because--and hopefully, we'll be
    able to resolve the compensation issues with NeighborWorks.
        But we gladly take on that work, because we are in the
    household stabilization business. We ask the question, what is
    the root cause of the foreclosure; is it a job loss; is it a
    health crisis; is it a family crisis? And we, and La Raza and
    others, have programs that respond to that.
        We try to stabilize the entire situation, and not look
    myopically at just the question about what caused--
        Mr. Green. Well, permit me to ask you this: What percentage
    of your cases start out as Level 1 cases?
        Mr. Richardson. Roughly a quarter.
        Mr. Green. So 75 percent do not start out as Level 1?
        Mr. Richardson. Correct.
        Mr. Green. See, listen, now. We're talking about
    fundamental fairness at this point. If 75 percent of your cases
    don't start out as Level 1, then I have in my mind a concern
    with reference to whether or not you should be getting the
    other 75 percent of that Level 1 business, as well.
        We want everybody to be treated fairly. That's all that I'm
    trying to raise now. And I think Ms. Bowdler, I think you
    initiated this.
        What percentage of your business is Level 1?
        Ms. Bowdler. How many do we get referred from the hotline?
        Mr. Green. Yes.
        Ms. Bowdler. That I don't actually know. I think a larger
    portion of ours probably come in the door straightaway.
        But we get a lot of--we have heard a lot of complaints and
    issues around Spanish language capacity. So we have a lot of
    overflow of folks who weren't able to get Spanish language
    service from other places. So we have to start over at Level 1
    with everybody.
        Mr. Green. I believe you start at Level 1, but you're not
    compensated at Level 1.
        Ms. Bowdler. Right, that's right.
        Mr. Green. Okay. So I'm really looking at a compensation
    issue now.
        Ms. Bowdler. That number, I'm sorry, I don't know off the
    top of my head, but I can get it to you.
        Mr. Green. Okay.
        Madam Chairwoman, my time is up, but I can sense that there
    is a fairness and equity issue that we have not quite addressed
    appropriately, and I'm not sure where we go, but I can sense
    it.
        Chairwoman Waters. Mr. Green, I think you're right, and we
    have been trying to get at that, because we're unveiling
    information that we simply did not understand or know prior to
    today. I think it's becoming clearer to us what is happening.
        Like I said, we want good counseling. We want everybody to
    be involved. But there appears to be something here that we're
    going to have to correct, and namely, one of the things that I
    see is precisely what you're getting at, and that is, it
    appears that one agency that's getting the referrals is getting
    paid for the Level 1. I don't know whether they're spending 20
    minutes or 1 hour, or they're referring to the servicer with no
    followup, and they're getting paid.
        They're showing back up, perhaps, are the ones who are
    taking them from start to finish, or putting more time, more
    work in. But certainly, when they show back up, they're not
    getting the Level 1 $150.
        One more question, if I may, and that is, I would like to
    know, Ms. Hernandez, where do you get your 70 percent? And tell
    me--I'm told by my staff that somehow you're relying on
    RealtyTrac to help you come up with these numbers. How do you
    do that?
        Ms. Hernandez. No, not RealtyTrac, the credit bureaus. So
    this was a study done by our affiliate, Consumer Credit
    Counseling Services of Atlanta on 21,234 people that they
    counseled through the HOPE Hotline with comprehensive
    counseling in 2007.
        They took that case file, they fast-forwarded a year, and
    they looked at credit bureau statistics to say, ``Have you in
    fact gone through foreclosure?'' Then they also bumped that
    data up against the address, up against RealtyTrac, to see if,
    in fact, the address a year later was the same as the address
    the client reported.
        So their data, that it was in fact 71 percent were still in
    their homes, and had avoided foreclosure, came from credit
    bureaus, so that foreclosure shows up on the credit report, and
    it did not show up on these credit reports.
        Chairwoman Waters. Our information says after 1 year, they
    collected data from credit bureaus and RealtyTrac.
        Ms. Hernandez. Yes. So that's what I--
        Chairwoman Waters. Well, I want to know, what role did
    RealtyTrac play?
        Ms. Hernandez. The RealtyTrac was just the address, so if a
    client reported, ``I'm at this address when I'm counseled,''
    and a year later, am I still at the same address, did that
    address go through foreclosure, that's what RealtyTrac tracks.
        Then we would know from that part of the database whether
    or not the property had gone through foreclosure, but we know
    from the homeowner, from their credit bureaus, that they did
    not go to foreclosure, they avoided foreclosure, they were
    still in their homes.
        Chairwoman Waters. We're going to have to take a look at
    this.
        Ms. Hernandez. We welcome that.
        Chairwoman Waters. The calculation of data. Yes. I'm sorry.
    We have held you here for a long time.
        And Mr. Cleaver, did you have any last questions that you
    would like to ask?
        Mr. Cleaver. No.
        Chairwoman Waters. Let me just say to our panelists today,
    thank you so very much. Don't forget, we're committed to
    strengthening counseling. None of us here are afraid to ask for
    money. We want to do that.
        But we have to make sure that we have fairness in the
    system, we have to make sure that we're not simply a referral
    agency going back to the same people who have been collecting
    the fees and doing the foreclosures to begin with.
        Don't forget, we're talking to servicers, and we don't want
    to just leave people in the hands of servicers and not follow
    it through, and know whether or not, for sure, without relying
    on data that's coming from places that, you know, we can't
    really confirm.
        Based on our own work, we want to know whether they got a
    modification or not.
        And so I'm going to try and lead this committee through
    changing some of the rules of this game so that everybody has
    access, everybody's getting paid. I would like to see you get
    more money.
        But I'm not so sure about this Level 1, 2, 3, stuff. I want
    people who know how to do it, and know how to get those loan
    modifications and not simply refer people and leave them in the
    hands of servicers.
        So thank you so much for being here today. We look forward
    to working with you.
        Ms. Keating. Thank you very much.
        Chairwoman Waters. The Chair notes that some members may
    have additional questions for this panel, which they may wish
    to submit in writing. Without objection, the hearing record
    will remain open for 30 days for members to submit written
    questions to these witnesses and to place their responses in
    the record.
        The panel is now dismissed. Thank you very much.
        Before we adjourn, the written statement of the following
    organization will be made part of the record of this hearing:
    The Housing Partnership Network.
        The hearing is now adjourned. Thank you very much.
        [Whereupon, at 5:13 p.m., the hearing was adjourned.]

                                A P P E N D I X

                                  May 13, 2009

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